Reducing the Frequency and Effects of Fraudulent

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2020

Reducing the Frequency and Effects of Fraudulent Activities in Reducing the Frequency and Effects of Fraudulent Activities in

Community Action Agencies Community Action Agencies

Marvin L J Blye Walden University

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This is to certify that the doctoral study by

Marvin L. J. Blye

has been found to be complete and satisfactory in all respects,

and that any and all revisions required by

the review committee have been made.

Review Committee

Dr. Dina Samora, Committee Chairperson, Doctor of Business Administration Faculty

Dr. Lisa Cave, Committee Member, Doctor of Business Administration Faculty

Dr. Deborah Nattress, University Reviewer, Doctor of Business Administration Faculty

Chief Academic Officer and Provost

Sue Subocz, Ph.D.

Walden University

2020

Abstract

Reducing the Frequency and Effects of Fraudulent Activities in Community Action

Agencies

by

Marvin L. J. Blye

MBA, Wilmington University, 1993

BS, University of Maryland Eastern Shore, 1988

Doctoral Study Submitted in Partial Fulfillment

of the Requirements for the Degree of

Doctor of Business Administration

Walden University

November 2020

Abstract

In the United States, nonprofit organization leaders estimate that $40 billion of revenue is

lost every year because of financial scandals and fraudulent activities. Fraud negatively

affects organizational functioning, service delivery, and board governance. Nonprofit

leaders who fail to prevent fraud increase the chance of their organization’s failure.

Grounded in Cressey’s fraud triangle theory, the purpose of this qualitative multiple case

study was to explore strategies nonprofit community action agency (CAA) executive

leaders use to reduce fraudulent financial activities. The participants comprised 5

executive CAA nonprofit leaders located in Maryland who effectively used strategies to

reduce fraudulent financial behaviors in their organizations. Data were collected from

semistructured interviews, analysis of organizations’ internal documents, and official

documentation review. Yin’s 5-stage analysis was used to analyze the data. Three themes

emerged: ethics and regulatory compliance, transformational leadership, and managerial

skills. A key recommendation is for CAA executive nonprofit leaders to foster

individualized consideration by mentoring leaders to comply with ethics and regulatory

compliances and incorporate strategies to mitigating fraudulent behaviors, which

increases organization performance, stakeholders’ motivation, and organization

sustainability. The implications for positive social change include the potential to

increase donors’ contributions and promote social programs and activities such as Head

Start, tax return preparations, and adult and children’s literacy in the local communities.

Reducing the Frequency and Effects of Fraudulent Activities in Community Action

Agencies

by

Marvin L. J. Blye

MBA, Wilmington University, 1993

BS, University of Maryland Eastern Shore, 1988

Doctoral Study Submitted in Partial Fulfillment

of the Requirements for the Degree of

Doctor of Business Administration

Walden University

November 2020

Dedication

This study is with honorable memory and dedication to my father and mother,

Joseph and Annabell Blye, the blessings that God chose to deliver and present me to this

world. My parents were God’s vision and purpose to fulfill His pathway for my life’s

process. I hope that my journey and life’s story is motivating and gives others the dream

to pursue their goals. I am grateful to God, His preserving my life, and blessed to have

reached this amazing accomplishment and success. My parents’ spirits are driving my life

and providing me the strength to always be thankful and reach beyond my present state. I

miss and love you both so much.

Acknowledgments

I would like to thank my heavenly Father (God) the great I Am for His infinite

grace and mercies as He favored me and provided the knowledge, wisdom, guidance, and

resources during this journey. In addition, I would like to thank my phenomenal Chair,

Dr. Dina Samora (Dr. D), my committee Dr. Lisa Cave, Dr. Deborah Nattress, and Dr.

Susan Davis for your leadership, guidance, and recommendations during my educational

journey. Dr. Kevin James, Dr. Desire Luamba, and Dr. Edward Boachie, thank you all for

your extra motivation, support, and efforts to keep me from jumping off the educational

ledge. I am grateful to and for you all.

To my wife, Nafisah, and siblings: Louise, Shirley, Sam, Mary, Jacqueline,

Louester, Teresa, Terry, Simon, Wanda, Curtis, my in-laws: Emmanuel and Maria,

Justina, Rose, Florence, Grace, Miranda, Margaret, Elizabeth, Michael, thank you for

your prayers, encouragement, and motivation. I will continue to make you all proud. I

thank God for each of you and love you all.

To my mentors, Mr. Freddy Mitchell, Dr. Tyrone Chase, Dr. Kirkland Hall, and

Dean Tilghman, you saw things in me that I could not see in myself. Thank you for

providing me with the chance to pursue my dreams, education, and career. I appreciated

you sharing your wisdom, vision, faith, and the sharing of your leadership and life’s

knowledge with me. You will forever be in my prayers and a part of my heart to serve

others.

To my best bud Steve Lorick, Sr., brothers and sisters in Christ, friends, Kappa

brothers, and supporters thank you for your prayers, patience, and understanding. You

were my spiritual strength during this journey. God blessed me with the opportunity to be

a brother, uncle, friend, inspiration, and role model for you. As you live, give yourself the

dream to pursue your achievements. I love you all.

i

Table of Contents

List of Tables ..................................................................................................................... iv

Section 1: Foundation of the Study ......................................................................................1

Background of the Problem ...........................................................................................1

Problem Statement .........................................................................................................2

Purpose Statement ..........................................................................................................2

Nature of the Study ........................................................................................................3

Research Question .........................................................................................................4

Interview Questions .......................................................................................................4

Conceptual Framework ..................................................................................................5

Operational Definitions ..................................................................................................6

Assumptions, Limitations, and Delimitations ................................................................7

Assumptions ............................................................................................................ 7

Limitations .............................................................................................................. 7

Delimitations ........................................................................................................... 8

Significance of the Study ...............................................................................................9

Contribution to Business Practice ........................................................................... 9

Implications for Social Change ............................................................................... 9

A Review of the Professional and Academic Literature ..............................................10

Organization of the Review .................................................................................. 11

Search Strategy ..................................................................................................... 11

Summary of Peer-Reviewed Articles .................................................................... 12

ii

Application to the Applied Business Problem ...................................................... 12

Community Action Agencies History and Conceptual Framework ..................... 13

Community Action Agencies Programs ............................................................... 14

Critical Analysis of Fraud Triangle Theory .......................................................... 17

Contrasting Theory of Ethical Concept ................................................................ 24

Analysis of Fraud in Workplaces .......................................................................... 27

Fraud in Profit Organizations................................................................................ 33

Fraud in Nonprofit Organizations ......................................................................... 41

Transition .....................................................................................................................48

Section 2: The Project ........................................................................................................50

Purpose Statement ........................................................................................................50

Role of the Researcher .................................................................................................50

Participants ...................................................................................................................52

Research Method and Design ......................................................................................53

Research Method .................................................................................................. 53

Research Design.................................................................................................... 54

Population and Sampling .............................................................................................55

Ethical Research...........................................................................................................57

Data Collection Instruments ........................................................................................58

Data Collection Technique ..........................................................................................61

Data Organization Technique ......................................................................................63

Data Analysis ...............................................................................................................64

iii

Reliability and Validity ................................................................................................66

Reliability .............................................................................................................. 66

Validity ................................................................................................................. 67

Transition and Summary ..............................................................................................69

Section 3: Application to Professional Practice and Implications for Change ..................70

Introduction ..................................................................................................................70

Presentation of the Findings.........................................................................................71

Theme 1: Ethics and Regulatory Compliance ...................................................... 74

Theme 2: Transformational Leadership Style....................................................... 78

Theme 3: Managerial Skills .................................................................................. 82

Applications to Professional Practice ..........................................................................86

Implications for Social Change ....................................................................................87

Recommendations for Action ......................................................................................88

Recommendations for Further Research ......................................................................90

Reflections ...................................................................................................................91

Conclusion ...................................................................................................................92

References ..........................................................................................................................94

Appendix A: Interview Protocol ......................................................................................132

Appendix B: Interview Questions ....................................................................................133

iv

List of Tables

Table 1. Details of References Used in the Literature Review ..........................................12

Table 2. Ethics and Regulations Compliance ....................................................................78

Table 3. Transformational Leadership Style ......................................................................81

Table 4. Managerial Skills .................................................................................................85

1

Section 1: Foundation of the Study

Reducing or mitigating fraud is essential to promote the longevity of an

organization (Ge, Koester, & McVay, 2017). A regular audit or control of accounting and

financial activities can influence an organization’s growth or performance for a long-term

activity (Gordian & Evers, 2017). The effectiveness of controllers or auditors in an

organization is a critical factor that managers can rely on to meet the company’s goals

and accomplish the mission statement of the organization (Ge et al., 2017). In nonprofit

organizations, the role of managers should also be meeting and performing services or

goods to increase customers’ satisfaction or donors’ contributions to promote the

business. But fraud negatively affects business performance. Integrating the concepts of

the fraud triangle may contribute to increase transparency and provide solutions to

mitigate fraud. Exploring and analyzing the impacts of fraud in nonprofit organizations

could lead to improvements in the relationship between nonprofit managers, government

agencies leaders, and private or official contributors.

Background of the Problem

Nonprofit business scandals and fraudulent acts of leaders motivated by perceived

perception and actual economic conditions have negatively affected organizational

functioning, services delivery, and board governance (Zona, Minoja, & Coda, 2013). In a

2016 survey, the Association of Certified Fraud Examiners (ACFE) Report to the Nations

on Occupational Fraud and Abuse estimated that nonprofit organizations account for 10%

of all occupational fraud cases every year to fraudulent financial acts, with an average

cost per incident of $100,000 (ACFE, 2016). Skimming cash, purchasing schemes, and

2

financial statement fraud are types of fraud that nonprofit managers must detect and

prevent to secure the organization’s assets (Zack & DeArmond, 2015). From 2008 to

2012, over 1,000 nonprofit organizations’ leaders in the United States discovered a

significant diversion of assets attributed to theft, investment fraud, embezzlement, and

other unauthorized uses of funds (Stephens & Flaherty, 2013). Further, covering up a

fraud in nonprofit organizations is a crime that may lead to losing millions of dollars in

future donations to support organizations’ activities (Stephens & Flaherty, 2013). In my

study, I explored strategies to reduce fraudulent financial activities in nonprofit

community action agencies.

Problem Statement

Nonprofit business scandals and fraudulent acts by leaders negatively affect

organizational functioning, services delivery, and board governance (Zona, Minoja, &

Coda, 2013). Nonprofit organization fraud cases increased by 20% in the United States

from 2010 to 2015, which amounted to about $40 billion of loss each year (Kummer,

Singh, & Best, 2015). The general business problem was nonprofit leaders who commit

fraudulent financial activities affect organizational sustainability. The specific business

problem was some nonprofit community action agency (CAA) executive leaders lack

strategies to reduce fraudulent financial activities.

Purpose Statement

The purpose of this qualitative multiple case study was to explore the strategies

that some nonprofit CAA executive leaders use to reduce fraudulent financial activities.

The population for this study included executive leaders of four nonprofit community

3

action agencies in Maryland who have implemented strategies that have successfully

reduced fraudulent financial activities. The contributions to social change are aiding

executive leaders in developing processes and procedures that advocate for better policies

and providing strategies to reduce fraudulent financial activities, promote corporate

responsibility, and influence the performance and positive outcomes of programs. The

contributions for social change can support the success of programs such as Head Start,

tax preparation, and adults’ and children’s education in local communities.

Nature of the Study

I used the qualitative method for this study. The qualitative method is the

systematic inquiry into a social phenomenon enabling researchers to focus on events and

outcomes of those events from the perspective of those involved (Dasgupta, 2015;

Teherani, Martimianakis, Stenfors-Hayes, Wadhwa, & Varpio, 2015). The qualitative

method was appropriate because the purpose of this study was to explore the strategies

that leaders in nonprofit CAAs use to reduce fraudulent financial activities. Using the

quantitative method involves hypotheses testing, and the mixed method involves aspects

of the qualitative and quantitative methodology (Dasgupta, 2015; Kruth, 2015). I did not

test hypotheses; therefore, neither the quantitative nor the mixed method was appropriate

for this study.

In qualitative studies, researchers use case study, phenomenology, narrative, or

ethnography. Researchers use a case study design to understand a real-world case when

the phenomenon and the context are not evident (Yin, 2017). I selected the multiple case

study design to explore strategies that nonprofit CAA executive leaders used to reduce

4

fraudulent financial activities. Researchers use a multiple case study design to explore

experiences using a qualitative methodology to get an in-depth understanding of

phenomena (Khan, 2014). In contrast, researchers use phenomenology to seek and

understand participants lived social experiences (Bevan, 2014). Narrative researchers

elicit participants’ stories of phenomena, and in an ethnography design, researchers

explore the language, beliefs, and behaviors of participants (Paschen & Ison, 2014). I did

not elicit stories, explore cultural group, or explore lived experiences of participants;

therefore, narratives, ethnography, and phenomenology were not appropriate for this

study.

Research Question

What strategies do nonprofit CAA executive leaders use to reduce fraudulent

financial activities?

Interview Questions

1. What strategies have you used to reduce fraudulent financial activities in your

organization?

2. How do you determine if your strategies used to reduce fraudulent financial

activities are working?

3. What strategies were the least effective to reduce fraudulent financial activities?

4. What, if any, strategies do you use to circumvent the pressure to commit a crime

in your organization?

5. What, if any, strategies do you use to circumvent the opportunity to commit a

crime in your organization?

5

6. What, if any, strategies do you use to circumvent the rationalization to commit a


7. What other information can you add about your strategies to reduce fraudulent


Conceptual Framework

The conceptual framework for this study is the fraud triangle. Cressey (1953)

developed the fraud triangle in 1950 as an approach to understand the unethical behaviors

of individuals who commit fraudulent crimes. The key tenets of the fraud triangle consist

of opportunity, pressure, and rationalization (Cressey, 1953). Most individuals require

some form of pressure to commit a criminal act.

Murphy and Dacin (2011) further expanded Cressey’s fraud triangle, confirming

that the characteristics of opportunity, attitude, and individual rationalization are likely

predictors of fraudulent financial acts. Companies that focus on preventing the key

factors that enable fraud may mitigate the creation of a fraud culture. Universally,

unethical acts of individuals occur when all three elements of the triangle exist (Albrecht,

Turnbull, Zhang, & Skousen, 2010). Consequently, I expected that the framework from

Cressey and the expanded theory from Murphy and Dacin were a reasonable foundation

for understanding strategies that some nonprofit CAA executive leaders use to reduce

fraudulent financial activities. The fraud triangle was the foundation for the development

of the research protocol.

6

Operational Definitions

Community action agencies (CAAs): Nonprofit private and public organizations

established under the Economic Opportunity Act of 1964 to fight America’s War on

Poverty (National Association for State Community Action Programs, 2014).

Ethical deficiency: The inability to distinguish between acceptable and

unacceptable behaviors that mitigate and thwart fraudulent activities (Harriss &

Atkinson, 2015).

Fraudulent financial activity: The ability to defraud individuals through false

presentations of financial data in reports that misrepresent facts (Internal Revenue

Service [IRS], 2015).

Occupational fraud and abuse: The use of one’s occupation for personal

enrichment through the deliberate misuse and misappropriation of organizational

resources and assets (ACFE, 2016).

Perceived opportunity: The weakness and ability to exploit a situation to one’s

advantage (Abdullahi & Mansor, 2015).

Perceived pressure: The motivation that leads to committing unethical behaviors

(Abdullahi & Mansor, 2015).

Perceived rationalization: The attempt to explain and justify a behavior with

logical reasoning (Abdullahi & Mansor, 2015).

7

Assumptions, Limitations, and Delimitations

Assumptions

Assumptions are statements that researchers presume to be accurate, often only

temporarily or for a specific purpose, such as building a theory (Parker, 2014). I assumed

that fraud prevails in the nonprofit sector of America and that ethical behavior could

prevent or limit fraud in organizations. Another assumption I made was that leaders of

CAAs will report their strategies within their organizations that reduced fraudulent

financial behaviors and activities within their CAA. I also explored fraudulent financial

activities in CAAs with the assumption that the tenets of the fraud triangle theory could

mitigate the behaviors of the participants in the organizations. Further, I assumed the

participants had the knowledge to answer the research questions in an open, honest, and

candid manner. I also assumed that the participants of the study would be executive

leaders with the interest of adding to the body of knowledge of strategies that reduced

fraudulent financial activities.

Limitations

Researchers limit their studies for internal and external validity of the research

(Holloway & Galvin, 2017). Limitations are matters and occurrences that arise in a study

beyond the researcher’s control (Yin, 2017). Limitations and generalizations can affect

the results and can affect the conclusions of the study. A limitation also refers to limiting

conditions or restrictive weaknesses in a study (Locke, Spirduso, & Silverman, 2016).

This study included three principal limitations. The first limitation was the number of

interview participants in the study that could provide a lack of perspectives on the topic

8

of fraudulent financial activities. The second limitation was the design of the case study

selected to conduct the study, as the outcomes can be predictable (Yin, 2017). The third

limitation was the conducting of interviews with participants with the responsibility of

organizational administration and the implementation of internal control measures to

provide strategies to reduce fraudulent financial activities in CAAs. Finally, the findings

of this study might not be interchangeable to other states of CAAs and might contribute

to reduce fraudulent financial activities.

Delimitations

Delimitations of a study are factors that arise from limitations in the scope of the

study and by the conscious exclusion and inclusion of decisions made during the

development of the study (Marshall & Rossman, 2016; Simon & Goes, 2013).

Delimitations are generalizations of populations and define the limits inherent in a study

(Locke et al., 2016). Delimitations of the study are (a) the problem of the study, (b) study

location, and (c) sample population. I elected to explore the strategies of nonprofit CAAs

use to reduce fraudulent financial activities. The qualitative multiple case study was

focused on the leaders of nonprofit CAAs regarding employing strategies to reduce

fraudulent financial activities. The study location was limited to Maryland and was not

generalized to other CAAs in other states. The study population was limited to the leaders

of the CAAs and the scope of information to explore strategies to reduce fraudulent

financial activities.

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Significance of the Study

In this qualitative multiple case study, I focused on the exploration of strategies

that executive leaders used to reduce the frequency and effects of fraudulent financial

activities in nonprofit community action agencies. The results of this study could help

leaders understand how to prevent or mitigate fraudulent financial activities and employ

managerial control systems to benefit the sustainability of businesses or nonprofit

organizations and the communities in which they serve.

Contribution to Business Practice

Business leaders can provide leaders with strategies to prevent fraudulent

financial activities. In addition, other nonprofit organizations may incorporate shared

strategies to prevent or mitigate the effects of fraudulent financial activities. Additionally,

executive leaders might have the ability to implement business strategies of internal

controls, systems changes, and checks and balances in operations that provide oversight

and enhancement of service deliverables while avoiding the loss of reputation and

derivative reductions in profits from fraudulent activities.

Implications for Social Change

The implications of social change from the results of this study include helping

other nonprofit executive leaders in developing processes and procedures that advocate

for better policies, strategies to reduce fraudulent financial activities, promoting corporate

responsibility, and influencing the performance and positive outcomes of business

activities. The results may also help affect the success of programs such as Head Start,

tax returns preparation, adults’ and children’s education in local communities, and other

10

services on which citizens in need depend. Leaders who catalyze the development and

sustainability of educational programs promote employees, families, and community

members’ satisfaction (Lueg & Radlach, 2016).

A Review of the Professional and Academic Literature

Researchers conduct literature reviews using multiple sources to show evidence

about the topic and the research question. The literature review is an in-depth analysis

that reveals what previous analysts argued about the topic and gives new ideas to

approach the current business problem (Baker, 2016; Winchester & Salji, 2016). The

effects of fraud and crime in nonprofit organizations are damaging to organizational

programs (Adelstein & Clegg, 2016). Failure to implement fraud mitigation strategies

and internal control measures may contribute to organizational failure or collapse. It is

critical for nonprofit leaders to understand the effects of fraud and its risk to

organizational programs (Haas, Van Craen, Skogan, & Fleitas, 2015; Rendon & Rendon,

2015). Some authors have argued that the opportunity for a person or people to commit

fraud results in a lack of supervision or internal controls of a company (Astuti,

Zuhrohtun, & Kusharyanti, 2015; Rasha & Andrew, 2012; Schuchter & Levi, 2016).

Thus, finding appropriate strategies to mitigate fraud in nonprofit organizations would

help nonprofit leaders to increase performance. The fraud triangle theory was a useful

framework for organization managers to analyze vulnerability, detect financial fraud, and

mitigate unethical behaviors (Cressey, 1950; Harrison, 2018; Kassem & Higson, 2012).

The integration of other academic sources into the fraud triangle theory was necessary to

manage, analyze, and mitigate fraud.

11

Researchers should identify themes and subthemes to reveal what other scholars

explored to give new ideas to resolve the current business problem (Callahan, 2014). In

the following literature review, I examined the use of the fraud triangle theory as a

primary conceptual framework to mitigate fraud and promote productivity. Additional

analysis included a synthesis of the contrasting theory of ethical concepts, organizational

leader’s strategies to mitigate fraud and the implementation of control measures to

prevent misconduct practices in nonprofit organizations.

Organization of the Review

The content outlined in the literature review is valuable for exploring strategies

nonprofit CAA leaders used to understand the effects of fraud on business performance,

increase transparency, and mitigate fraud in their organizations. The literature review is

organized around search strategies, the percentage of articles used, applications to the

business problem, and analysis of Cressey’s fraud triangle theory. The literature also

provides an overview of the contrasting theory of ethical concepts that some nonprofit

community action leaders have used as strategies to reduce fraudulent financial activities.

Search Strategy

I used a variety of sources to research the topics of interest. The information in the

literature review started with an identification of peer-reviewed articles, journals,

dissertations, books, and internet resources relevant to the topic of this study. I explored

resources directly from organizations such as the Association of Fraud Examiners, U.S.

non-governmental organizations, and the CAAs’ archives and records system. I also used

the Google Scholar search engine and the Walden University library online system. The

12

Walden University library online system was the primary source of the literature review,

using keyword searches in the following databases: (a) Business source complete (b)

ProQuest, (c) SAGE, and (d) Science direct. I used the following keywords to identify

my sources: Fraud triangle theory, ethical theory, nonprofits, crime, sustainability, board

governance, strategies and controls, and corporate social responsibility.

Summary of Peer-Reviewed Articles

The literature review included an analysis and synthesis of Cressey’s (1950) fraud

triangle theory. As required by Walden University, I used Ulrich’s Periodical Directory to

verify scholar peer-reviewed journal articles and ensure the reliability of sources (Walden

University, 2016). The literature review had 176 sources, which includes 95% (167) peer-

reviewed articles. The total of my sources represented 85% of articles within 2015 and

2020. Table 1 includes the details of references explored in the literature review.

Table 1

Details of References Used in the Literature Review

Reference Percentage Total

Peer-reviewed articles 95% 167

Not peer-reviewed 5% 9

Less than 5 years (2015-2020) 85% 149

More than 5 Years (< 2015) 15% 27

Application to the Applied Business Problem

The purpose of this qualitative multiple case study was to explore strategies that

some nonprofit community agency executive leaders used to reduce fraudulent financial

activities. Nonprofit business scandals and fraudulent acts negatively affect

organizations’ reputation, success, and may lead to a tremendous financial crisis (Zona et

13

al., 2013). My analysis and synthesis of the literature review outlined Cressey’s (1953)

fraud triangle theory as a strategic response to financial fraud in nonprofit community

action agencies, managerial control systems, sustainability, and corporate social

responsibilities of nonprofit organizations.

Community Action Agencies History and Conceptual Framework

In the United States, the assassination of President John F. Kennedy sparked

legislation to address the war on poverty through the Economic Opportunity Act of 1964.

President Lyndon B. Johnson, through legislation, tried to settle the nation and regain

public trust. President Johnson, through the 1964 act, established training, educational,

and service programs for communities and job corps throughout the country to reduce

poverty and improve life in the community (Brauer, 1982). The 1964 act was critical and

led to the creation of the Community Action Program that oversees the local CAAs in the

United States and its territories for the welfare of the local communities.

Managers in the CAAs help to fight poverty by empowering poor Americans

through programs to counter poverty. CAAs’ contributions to sustainable programs

directly correlate to organizational leaders and their implementation of internal controls

to mitigate fraud (Goetz, 2017). CAA leaders in their strengthening of program

compliance, fiscal, operational accountabilities, board governance and oversight, and

processes help to identify fraudulent behaviors and implement organizational controls

that thwart fraud within agencies. For my study, I used Cressey’s (1953) fraud triangle

theory to explore the role of the Head Start, and tax programs, strategies leaders in

community action agencies may use to reduce fraudulent acts in nonprofit organizations.

14

Cressey’s fraud triangle theory was the lens to understand the pressure, opportunities, and

rationalization for nonprofit agents to commit fraud.

Community Action Agencies Programs

Head Start program. The Head Start program is a nonprofit organization that

serves children from birth to 3 years in response to research evidence highlighting that

the first years of a child’s life are essential to their long-term growth and brain

development. The role of the Head Start program is to prepare children with the basics of

social and emotional development, cognition, language and literacy, language and

communication, mathematics development, and scientific reasoning (McClelland &

Cameron, 2019). The Head Start program is among the most significant educational

nonprofit organizational structures that prepare children to enter school. The Head Start

program is a multibillion-dollar nonprofit organization that serves over 899,000 children

and families throughout the United Nations (Head Start Information, 2017). Head Start

programs are significantly contributing to good children’s educational systems.

Promoting earlier children’s education development is critical to motivate youth

to engage in school and increase knowledge. Based on research on determinants and

implications for adverse linear cognitive development growth outcomes in adolescence

from low- and middle-income countries in their early years, psychosocial development

among preschool children’s outcomes need additional educational resources and

programs to catch up in their later years (Desmond & Casale, 2017). Programs within

CAAs must have the curriculum components that address cognitive-developmental

learning for children and collect enough financial means to provide early learners with a

15

good education (Schonert-Recihi et al., 2015). CAA leaders must synchronize with the

school systems for children's education and promote a positive social change (Tefera,

2018). Leaders of CAAs must promote trust among stakeholders in the program by

having competent managers and improving positive behaviors to provide comprehensive

resources for the benefit of children’s educational programs.

Tax program. Understanding and complying with tax regulations may be

challenging for individuals and business managers (Bird & Davis-Nozemack, 2018). But

nonprofit organization leaders can assist people to comply with government regulations

(Siliunas, Small, & Wallerstein, 2019). For tax assistance, CAAs leaders have

implemented Volunteer Income Tax Assistance to offer free income tax preparation to

people who make annual revenue less than $56,000, people with disabilities, limited

English speakers, and refugees who need assistance (Head Start Information, 2017). For

businesses, managers must promote their activities in complying with federal and state

tax regulations (Goss, Barnes, & Rose, 2019). Taxes collected and paid timely and

equitably by business managers constitute a principal source of revenue for the

government and contribute to social projects such as roads, schools, hospitals, salaries of

government employees, and social security (Akcura, 2015; Kioko & Zhang, 2019).

Therefore, complying with tax regulation is one of the most important regulations that

may determine the efficiency and longevity of any organization (Jiang, Aldewereld,

Dignum, Wang, & Baida, 2015; Madura, 2015).

There are two different groups of taxes: direct and indirect (Davis, Guenther,

Krull, & Williams, 2015). Direct taxes are taxes that the government directly collects

16

through individuals and organizations, and indirect taxes are taxes that some intermediary

agencies collect on goods or services sold for the government (Davis et al., 2015). For

example, taxes from import and export of goods and services are indirect taxes and

constitute another vital source of government revenue (Zhuk, 2018).

Further, one of the tax regulations for nonprofit organizations requires the

submission of the annual 990 tax returns forms before April 15 of each year to avoid late

filing fees (Hopper, 2017; Svensson & Moorman, 2019). Based on the Statement of

Financial Accounting Standards No. 116 on nonprofit organizations’ performance,

nonprofit organization leaders should recognize and report organizational assets and

revenues annually through their 990-tax return reporting to increase the confidence of

stakeholders (Archambeault, Webber, & Greenlee, 2015). Thus, it is critical for both

profit and nonprofit business leaders to recruit individuals who have tax skills and

business experience to mitigate management risk of noncompliance (Cabral, Mahoney,

McGahan, & Potoski, 2019). However, future research is needed about the implication of

taxes in business profitability or productivity in the current business context affected by

the multiple effects of globalization.

Based on the fraud triangle theory, individuals and organizations must declare,

report, and pay their taxes fairly to avoid penalization. Complying with tax policies

contributes to prevent actions like penalization by government and fraud by employees or

managers (Oishi, Kushlev, & Schimmack, 2018). Further, complying with federal and

state tax regulations, reporting requirements, and policies are crucial strategies for

nonprofit organizations managers to reach their mission and goals with success (Okpeyo,

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Musah, & Gakpetor, 2019). As stated by Cressey (1953), the effects of fraud may have a

positive or negative effect on the business or social environment. The lack of punishment

to tax fraudsters ruin the values of our culture in the communities (Okpeyo et al., 2019),

but fraudsters have developed new strategies to operate online or using electronic devices

to overcome the laws (Black, Christensen, Kiosse & Steffen, 2017; Celik, 2016).

Therefore, promoting business expansion and profit, nonprofit managers together with

government leaders must promote ethical values at all levels of organization structures

(Yeh & Chen, 2019). It is also the federal and state government’s mission to punish fraud

activists as an example of good morality and ethics.

Critical Analysis of Fraud Triangle Theory

In 1950, Cressey defined the fraud triangle theory as a framework designed to

explain the reasons why employees commit fraud in organizations. The key tenets of the

fraud triangle consist of opportunity, pressure, and rationalization (Cressey, 1953). The

first factor in the fraud triangle theory is the pressure related to the motivation that leads

to acting unethically (Abdullahi & Mansor, 2015). Every fraud perpetrator faces some

burden to commit unethical behavior for many reasons (Mansor, 2015). For example,

ethical knowledge can moderate the relationship between pressure and organizational

fraud because ethics has a direct and indirect influence on work engagement and

organizational misbehavior (Mansor, 2015). Individuals usually rationalize their

decisions to behave fraudulently or unethically by using terminology that expresses

different ethical theories such as utilitarianism (Abdullahi & Mansor, 2015). In a similar

view, the concept of rationalization, which is the third element of the fraud triangle, leads

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to unethical behavior (Kassem & Higson, 2012). Rationalization is the validation of

unethical behavior and may lead to criminal activity (Kassem & Higson, 2012). If an

individual cannot justify immoral actions, it is unlikely that he or she will engage in fraud

(Abdullahi & Mansor, 2015; Greenwood, 2016).

Because of the complexity of fraud phenomenon, some scholar analysts have

different views about fraud conception (Free, 2015). For example, Svatos (2017) defined

fraud as a criminal act that affects the entire community. Poor management controls and

regulations may encourage individuals to engage in fraud by misstating financial

transactions, which can derail most administrations (Abdullahi & Mansor, 2015; Astuti,

Zuhrohtun, & Kusharyanti, 2015; Carver, Klein, & Gistinger, 2015; Sorunke, 2016).

Previous researchers have also explained the act of providing intentionally false

information to stakeholders in the organization as a deceitful or fraudulent behavior and

encouraged managers to increase transparency and audits (Church, Jenkins, & Stanley,

2018; Houlbrook, 2011; Karcz & Papadakos, 2011). Much work remains to analyze and

understand the true nature of fraud in profit and nonprofit organizations (Mukherjee,

2016).

Additionally, individuals may commit fraud at any time and in any organization.

The relationships and transactions in the marketplace should be equitable, just, and fair;

nevertheless, several individuals and businesses have violated these traits leading to

immoral behaviors (Komarova Loureiro et al., 2016). Though fraud is harmful to

business performance, fraud has become a significant business activity in the current

business environment (Free & Murphy, 2015). Researchers have noted that one of most

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significant problems to the world’s economy had been the lack of efficient organizational

controls and transparency that has led to corrupt behaviors surrounding the cases such as

corporate financial scandals (Abdullahi & Mansor, 2015; Free, 2015; Muhtar, Sutaryo, &

Sriyanto, 2018). The most notable cases of fraud came from companies like Enron,

WorldCom, and Tyco, and individuals like Bernie Madoff and Martha Stewart

(Abdullahi & Mansor, 2015; Komarova Loureiro et al., 2016; Lokanan, 2015).

The motivation to commit fraud can arise from various sources. Based on the

fraud triangle theory, pressure, opportunity, and rationalization are significant factors for

individuals to commit fraudulent crimes (Cressey, 1950). For instance, employees’

ethical values are significant to their actions on opportunity and rationalization to commit

fraud (Said, Alam, Ramli, & Rafidi, 2017). Several authors have also argued that for

fraud to take place in an organization, the pressure, opportunity, and rationalization must

be present simultaneously (Abdullahi & Mansor, 2015; Astuti et al., 2015; Carver et al.,

2015; Komarova Loureiro et al., 2016; Lokanan, 2015; Roden, Cox, & Kim, 2016; Said

et al., 2017). Nonprofit leaders should analyze and fully understand the causes of

employees to engage in financial fraud and find strategies to mitigate fraud for

organizational performance. The indications of fraudulent activities may result in the

short or long-term lack of liquidity or customer deception (Hsu, Wiklund, & Cotton,

2017; MacLennan, Piña, Hafford, & Moran, 2016).\

To address fraud, policymakers must consider the rationale and automatic

contributors to help curve these behaviors (Komarova Loureiro et al., 2016).

Additionally, effective leaders should motivate employees to overcome their self-interest

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for the benefit of the organization (Sun & Wang, 2016). It is also essential for nonprofit

leaders to understand that they are not immune to unethical behaviors, and fraudulent

activities could pose a significant risk to an organization’s finance and culture (Mlambo,

Mubecua, Mpanza, & Mlambo, 2019). But financial resources are essential for nonprofit

organizations to sustain social programs in the communities (Archibald, Daniels, &

Sinclair, 2017); therefore, understanding the causes and effects of these unethical

behaviors may significantly help nonprofit leaders when such acts occur (Guest, 2017;

Jakhu &Malik, 2017).

Pressure. Individual pressure is an influence on individuals to engage in

fraudulent activities, which can cause financial problems to the organization (Mansor,

2015). Using an empirical study and psychoanalysis method to distinguish perceptions

and ideas, Arlow (2018) found that awareness is critical to control internal and external

feelings to commit fraudulent behaviors. On the other hand, Pamela, Murphy, and Free

(2016) used a survey to identify how an instrumental organization climate affects fraud.

Pamela et al. found that 39 % of respondents admitted committing fraud. Pamela et al.

concluded that the pressure on individuals does not need to make sense to outside

observers, but it does need to be present. In the case of financial fraud, usually, a

temporary situation arises where there is a chance to commit fraud without a high chance

of prosecution. Johanson and Carey (2016) argued that financial problems are not the

only reasons individuals commit fraud. Per Johanson and Carey (2016), some individuals

engage in fraudulent activities for many reasons, such as the desire to buy expensive cars,

houses, or clothes. Dellaportas (2013), Neu, Everett, and Rahaman (2013) also identified

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work-related pressure, the pressure associated with gambling and drug addiction, and

pressure associated with individuals as non-financial pressure factors that lead individuals

to engage in unethical behaviors. Lokanan (2015) explored the assertion of the fraud

triangle as a critical tool to mitigate fraud in the workplace. The author found that fraud is

a complex phenomenon that involves workplace satisfaction and social inequities.

Business managers or leaders should be aware of implementing ethical values and

strategies to see fraud as an act of revenge against their employers.

Non-shareable financial pressures consist of financial stress experienced by an

individual. Workers’ dissatisfaction and perceived inequities are the main predictors that

motivate and contribute to work-related non-sharable financial pressures and fraudulent

acts in the workplace (Pwc, 2014). Cressey (1953) opined that when someone in a

position of trust violates that trust to address non-sharable financial pressures, the

perceived opportunity to commit fraud arises. Lokanan (2015) explained the fraud

triangle as a useful framework to mitigate fraudulent acts and added that individuals

might commit fraud because of non-shareable financial pressure. To Lokanan, when

individuals feel the strain, they tend to contravene the law to solve their problems.

Nonprofit leaders should understand the nature of non-financial pressure that their

employees may face to mitigate the effects of fraudulent acts (Burnes et al., 2017). Based

on the fraud triangle theory, despite the pressure an individual may or may not face, the

risk of committing financial fraud is always permanent unless there is no opportunity

(Drabkova, 2018).

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Opportunity. An opportunity to commit a crime reveals that there are gaps of

ineffective controls and a governance system that allows an individual to commit

organizational fraud. Neu, Everett, and Rahaman (2013) analyzed the nature and role of

accounting practices in mitigating fraudulent practices and found that skillful use of

accounting and social interactions enable corruption. The authors also argued that the

opportunity to engage in fraud increases as the organization’s control structure weakens,

its corporate governance becomes less effective, and the quality of its audit functions

deteriorates. Similarly, some authors argued that the opportunity for an individual or

group of individuals to commit fraud is often due to the lack of supervision or regular

internal controls of the company (Arshad, Razali, Bakar, 2015; Astuti, Zuhrohtun, &

Kusharyanti, 2015). The lack of internal controls promotes an atmosphere that may

motivate, create, or present an opportunity to commit a crime. When internal controls are

weak or if there is a lack of ineffective board governance, opportunities to commit

fraudulent acts increase (Jaroslaw, 2016).

Organizational management discussion and analysis reports are internal controls

and archival documents that distinguish between fraudulent and truthful reports (Purda &

Skillicorn, 2015). Based on the scandal from the early 2000s from organizations such as

Tyco, Enron, and World Com, the United States Congress enacted the Sarbanes-Oxley

Act of 2002 in order to tighten the regulations on internal accounting practices and

increase transparency in financial transactions of companies (Black et al., 2017;

Camfferman & Wielhouwer, 2019). Gordian and Evers (2017) argued in their empirical

study that organizational culture depends on managers’ abilities to implement controls

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and found that the adverse effects of fraud affect the organization’s longevity.

Accounting control systems and evaluation mechanisms should be managerial tools that

contribute to sound decision-making, strategic planning, and implementation (Alferjany,

Salama, Amuna, Shobaki, & Naser, 2018). Per Leitner and Wall (2015), nonprofit

organization leaders or managers must review the internal control systems to sustain

transparency and promote internal controls to detect fraud, which may not be visible in

regular business activities.

Rationalization. Rationalization increases the likelihood to commit fraud.

N’Guilla-Sow, Basiruddin, Abdul-Rasid, & Husin (2018) used a sample of 126

Malaysian small and middle-sized enterprises to understand fraud schemes. Based on the

fraud theory, the authors found that rationalization played a critical role in the mindset of

a person to commit an unethical act or fraud. Morales, Gendron, and Guénin-Paracini

(2014) further used an empirical study to examine the genealogy of the fraud triangle and

found that rationalization is the third element of the fraud triangle, which indicates that

the fraud perpetrator must formulate some morally acceptable idea to them before

engaging in unethical behavior. If an individual cannot justify dishonest actions, it is

unlikely that he or she will engage in fraud (Yadav, 2016). Nonprofit leaders have the

responsibility to incorporate governing strategies in organizations that prevent individuals

from committing fraud.

Individuals rationalize their behaviors and actions that support and justify them

committing a crime. Kassem and Higson (2012) used an empirical study to explain

Cressey’s fraud theory to show its significance and present other fraud models that

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auditors could consider in the auditing processes. Kassem and Higson found that fraud

has significant attention from regulators, auditors, and the public. Per Kassem and

Higson, a person’s rationalization thoughts may affect their ability to make an ethical

versus unethical criminal act. Abdullahi and Mansor (2015) echoed that if a person

cannot determine right from wrong in decision-making, it is likely, he or she may commit

a crime. Nonprofit policies and statements of ethics must be present in any organization

to ensure success because it is always probable that individuals engage in fraud for

diverse reasons.

Contrasting Theory of Ethical Concept

In nonprofit organizations, fraud may not always be visible and easy to detect. In

some cases, leaders may have to increase internal controls or promote ethical values to

mitigate fraud. In 1889, Immanuel Kant developed ethical theory and believed that

ethical values lead to the rightness of an individual’s action (Chilton, Foyou, & King,

2018). An individual that is aware of decisions and behaviors to commit fraud makes an

ethical decision. Abdullahi and Mansor (2015) used a conceptual approach to understand

and analyze the primary motivations of fraud by auditors, accountants, and other anti-

fraud agents. Using secondary sources from the internet, textbooks, and journal articles,

the authors found that dishonest and immoral individuals commit more fraud than people

with a high ethical value. Based on the evolution of ethics value, Adelstein and Clegg

found in their quasi-experimental study of 358 employees surveyed within a

pharmaceutical company on the Eastern coast of the U.S that ethics guide employee’s

moral and behavioral principles. Downe, Cowell, and Morgan (2016) added that ethical

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behavior in organizations, which consist of the principles, policies, and guidelines are

critical sources that contribute to an effective governance of the organization. To

understand fraud’s nature, Sorunke (2016) echoed that the personal ethics of an

individual are critical factors in a fraudster’s motivation to commit fraud. To promote

ethical value, it is critical for nonprofit leaders to establish credible layers of code of

conduct that may detect and prevent fraudulent practices.

The ethical theory leads to certain qualities that define appropriate behavior and

the right action to undertake for the benefit of the organization (Yazdani & Murad, 2015).

Chan and Ananthram (2019) explained the ethical theory as a set of criteria for potential

decision-making or action taking in the interest of the organization. Treviño, den

Nieuwenboer, and Kish-Gephart (2014) argued that in organizational settings, people

who are acting and making decisions do so within the power and authority structures.

Nieuwenboer et al. also added that leaders make decisions under the organizational

leadership, peer influences, and constraints, which may lead an organizational leader to

act unethically or ethically.

Some scholars have studied the effects of ethics in organizations. Mathenge

(2014) used a survey questionnaire to measure the integrity and morality of Kenyan

police officers. Mathenge found that the lack of high ethical values such as competence,

confidence, and professionalism were the leading causes of corruption among police

officers. Similarly, several researchers have examined the influence of ethical values in

the workplace and found a correlation between ethics and job satisfaction (Evans, 2017;

Said, Alam, Ramli, & Rafidi, 2017; Soltani, 2014). Analyzing the role of ethics in

26

organizations, Hess and Cottrell Jr. (2016) argued that promoting ethical values might

reduce the tendency of employees to commit fraud.

On the contrary, Chen, Hou, and Lee (2013) and Yaakobi and Weisberg (2018)

found that the lack of employees’ ethical values would lead to bribery and corruption. Per

Chen et al., executive leaders who lack ethical values will tend to ignore policies and

procedures to pursue their self-interests. The findings of Chen et al. are significant in

improving decision-making and ethical value in organizations. Nonprofit managers

should promote ethical value to improve their leadership and managerial decisions.

The ethical theory is similar to the fraud triangle theory because of the dilemma of

decision-making. Individuals who engage in fraud under the fraud triangle theory must

go through three main stages of their decision-making. Cressey (1953) suggested three

primary perceptions that influence individuals’ choices to engage in fraud. Per Cressey,

pressure, opportunity, and rationalization are factors that motivate individuals to commit

unethical behaviors. For example, if a manager adheres to the ethical and moral standard,

his attitude, and position may influence followers to comply with ethical values and

contribute to detecting and mitigating fraud (Abdullahi & Mansor, 2015; Hammersley,

2015, Ho & Mallick, 2017). CAAs leaders must increasingly monitor compliance with

ethical codes and standards to promote trust and discourage fraud. However, poor

management monitoring controls may lead to weaknesses in ethical and moral values and

fraud detection. The fundamental tenets of ethical theory are critical for nonprofit

organization managers to provide strategies to mitigate fraud and increase confidence

among stakeholders.

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Analysis of Fraud in Workplaces

Fraud is a reality in workplaces, and employees can be the most significant source

of fraud. Raval (2018) used a methodological approach to explain the role of human

desires, intentions, and actions in the indulgence of, or resistance to, and the act of

financial fraud. Raval found that the evidence from the fields of religion, philosophy,

sociology, neurology, behavioral economics, and social psychology leads to the

development of the disposition fraud model. Ge, Koester, and McVay (2017) echoed that

negative behaviors such as corruption or fraud could lead to organizational failure.

Bošković (2017) added that fraud could be an essential factor that can demotivate

employees to reach a company’s goals when it becomes regular and routine. Per Raval,

there are direct and indirect human attitudes in committing fraud. Based on the fraud

triangle theory, nonprofit leaders should rely on the disposition fraud model to predict

intentional actions of fraud.

Rossouw (2000) also indicated that a proper understanding of fraud phenomenon

is critical to undermining it. Using a qualitative case study, Rossouw analyzed the

motivation of fraud committed by the convicted people in prison and found that the fraud

committed by prisoners covered a broad spectrum. As stated by Tam (2016), fraud can

arise from self-centered considerations like greed or financial gain and other-centered

considerations like providing material assistance to family members or friends in need.

Rossouw’s conclusion also revealed that some participants committed fraud under the

pressure or voluntarily. Rationalization provided by the participants included blaming

others for their actions.

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Fraud detection. Fraudulent practices have increased in the post-financial crisis

years, while at the same time; resources allocated to fight fraud have been insignificant.

Purda and Skillicorn (2015) developed a data-generated tool to distinguish fraudulent and

truthful reports of auditors and controllers. Based on the language used in the annual and

interim reports, the authors found that controllers and auditors used some languages to

cover up fraudulent acts that affected regulators and investors in choosing cost-effective

tools to make investment decisions. Appiah (2015) opined that a critical objective of

control should be to inform and assist management team leaders with the facts from

which they could make managerial decisions to improve business policies and

performance. Effective control should also take into account the alternative to detect

fraud by providing financial and nonfinancial tools for business prosperity (Chima,

Obiah, & Linda, 2018; Masegare & Ngoepe, 2018; Warren & Schweitzer, 2018).

Nonprofit managers should discourage fraud behaviors within organizations to encourage

a positive attitude during controls or audit operations.

Complying with accounting and financial principles is critical for effective

nonprofit organization leaders to promote transparency and detect fraud. Purda and

Skillicorn (2015) used a sample of quarterly and annual reports issued by firms with at

least one accounting and auditing enforcement release to assert fraud in organizations.

Using a decision-tree approach to establish a rank-ordered list of words from the

Management Discussion and Analysis sections, the authors suggested that real managers

should be able to differentiate false and truthful reports. Based on the top 200 words from

a selected list of words, and using the support vector machines (SVMs), Purda and

29

Skillicorn revealed that the lack of truthfulness in writing or reporting the facts could hurt

the quality and seriousness of the report. For Purda and Silicorn, each report should refer

to the real facts. An advantage of this approach is that one does not require any previous

knowledge of what may constitute a suspicious word and its updating based on new

reports. Dong, Liao, and Zhang (2018) added that effective managers who develop

statistical methods for analyzing the language used in the Management Discussion and

Analysis section of a firm’s annual and quarterly reports were critical tools of fraud

detection. Moreover, using scientific and analytic methods are also evolutionary fraud-

detection techniques that may contribute to business performance.

In the current environmental business context, researchers use statistical methods

to detect fraudulent activities while analyzing financial statements. Soviany (2018) used

artificial intelligence (AI) to detect online fraudulent transactions. Soviany focused on a

supervised learning engine with mega data components capable of supporting high-

performance fraud detection and improving the predictive value of original data. Soviany

found that one of the promising areas of AI application concerned the financial sector and

particularly the usage of AI to find solutions for fraud management. Technology

innovation may contribute positively or negatively to high-performance fraud detection

(Nuscheler, Engelen, & Zahra, 2019; Sarah, 2016). Having an adequate and appropriate

technological tool may be significant to mitigate or detect fraud before a catastrophic

situation arises.

The research of Albrecht and Hoopes (2014) on the public expectation of auditors

in detecting fraud was crucial for understanding how fraud occurs in organizations.

30

Despite the public’s view of auditors as organization protectors, accountants and auditors

have the primary duty to design, implement, and maintain a system of internal controls

that provide reasonable assurance for business performance (Church et al., 2018;

Permana, Perdana, & Kurniasih, 2017; Rieppel 2018). Dumay, La Torre, and Farneti

(2019) echoed that auditors have the responsibility to provide reasonable assurance that

financial statements are accurate and prepared consecutively by generally accepted

accounting principles. Albrecht and Hoopes’ (2014) findings regarding the experience of

an expert in witnessing numerous major fraud cases to illustrate situations in which

auditors can expect to detect fraud were crucial to assessing fraud in organizations. To

Albrecht and Hoopers, some factors make fraud nearly impossible to discover, even when

a competent auditor complies with the generally accepted accounting standards. Many

factors like misappropriation of assets or misstatement may make fraud difficult to detect

by auditors (Appiah, 2015; Jenkins, Negangard & Oler, 2018). Akeem (2015) added that

factors that make fraud detection particularly difficult are when audited financial

statements include the nature of accounting records, the use of outsiders to help conceal

the frauds, reluctance of people to disclose what they know, and forgery and lying.

Bhasin (2016) further identified four factors, which are not independent of each other, but

that existed in the financial statement fraud cases. Per Bhasin, inadequate training and

experience of the auditors, poor planning to gather evidence, and lack of professionalism

and independence are factors that lead to the audit inefficiency.

Technological fraud. The development of fraud increases with technology

innovation (Bhasin, 2016). Paté-Cornell, Kuypers, Smith, and Keller (2018) discussed

31

using Bayesian analysis, a general probabilistic risk analysis for cybersecurity in an

organization. According to Paté-Cornell et al., the risk of cybersecurity is increasing each

year, and companies are at risk if there are no efficient international and local regulations

to prevent businesses against cyber-attacks. The authors also found that the financial

losses for companies due to cyber-attacks come from risk management decisions based

on the lack of adequate data analysis and fraud prevention by managers. Biglow (2016)

and Daniel (2016) echoed that hacking, slamming, or changing the telephone service

without customer knowledge, phishing, or acquiring usernames, passwords, and credit

card information, are emerging types of thefts and frauds in the current business and

social environment caused by technology innovation. Raghavan (2018) added that it is of

vital importance that corporate managers understand the importance of financial crimes

as well as cyber risk attacks to protect their businesses against local and international

frauds. Managers must be aware of the impacts of technology innovation to discourage

fraudsters or thieves who exploit the weaknesses of internal control to engage in criminal

activities (Holt & Kennedy, 2019; Horn, Dunagan, & Carey, 2018; Ndofor, Wesley, &

Priem, 2015).

Fraudulent language. Analyzing fraud in the current business context,

Holderness Jr., McNeal, Riley, and Wells (2018) noted that new generation technology

divides the business world with new slangs and old phrasings. Over time, these types of

changes infiltrate into business communications. Bennett and Hatfield (2018) stated that

changes in language and communication affected the way auditors should analyze the

risk of fraud in the modern business environment. For example, using quick abbreviated

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messages like emojis, memes, digital stickers, and other image-based digital

communications are different means that people use to interact with one another in

emails, text messages, instant messages, and on social media. Holderness et al. advised

audit leaders to encourage their staff members to have in-person conversations, especially

when seeking important or potentially sensitive information from clients. Auditors and

anti-fraud staff also need to take proactive steps to keep up with language and

communication changes so that they can effectively communicate with all parties during

their engagements.

Workplace crimes. Vadera and Pratt (2013) examined different types of

workplace crimes. The authors found that workplace crimes might consist of pro-

organizational, nonaligned-organizational, and anti-organizational crimes based on the

intentions of the perpetrators. Vadera and Pratt also found that fraud can be pathologic

and linked to various identification, such as over-identification, over-disidentification,

under-identification, and ambivalent identification. Gupta and Gupta (2015) opined that

pathologic fraud behaviors lead to propensities to commit other types of workplace

crimes. Employers should increase work meetings and training to promote ethical

standards and company culture among employees.

Vadera and Pratt’s analysis are critical to determining that over-identification and

over-disidentification have direct effects on workplace crimes, whereas under-

identification and ambivalent identification indirectly influence the propensity to engage

in workplace crimes. The results of Vadera and Pratt may lead to clarify the inconsistent

conclusions in previous work in workplace crimes and emphasizes the importance of

33

including organizational identification as a critical factor in the extant models of

workplace crimes. Tombs (2017) suggested that policy implications regarding workplace

crimes within different agencies might be more effective in enforcing laws and

disciplining individuals engaged in criminal activities.

Fraud in Profit Organizations

Many researchers and experts have written a lot about fraud in for-profit

organizations due to the increasing rate of fraud in the current business context. Sridharan

and Hadley (2018) used a case study methodology to investigate the factors that allowed

and encouraged a massive case of fraud at Wells Fargo. Wells Fargo is among the largest

and successful banks in the United States. Sridharan and Hadley founded that the effect

of internal audit failure, firm culture, board structure, and oversight were the significant

causes of fraud at Wells Fargo. Elson and Ingram (2018) echoed and highlighted that the

pressure to cross-sell was intense, and Wells Fargo managers provided its employees

with compensation to cover fraud. Opening deposit and credit cards account for more

than two million customers without customers’ authorizations were the vast scandals that

affected the reputation and credibility of the banking systems. Per Elson and Ingram,

Wells Fargo employees from top to bottom committed both frauds and crimes.

Wells Fargo crimes and frauds affected business activities. The company’s global

managers of internal audit who created fake customer identities and generated fake

invoices against their names committed fraud to inflate the company’s revenue. Zerban

(2018) revealed in his conclusion that the global head of internal audit of Wells Fargo

also forged board resolutions to obtain loans illegally for the company in this scheme

34

fraud. It also appeared that the cash that the company raised through American

Depository Receipts in the United States never made it to the balance sheet. Greed for

money, power, competition, success, and prestige were the compelling forces that

influenced Well Fargo managers to violate bank regulations.

In a similar case, Drábkova (2018) evaluated the risk of the effect of accounting

errors and frauds on reported accounting records based on the CFEBT risk triangle of

accounting errors and frauds. Drábkova used a case study to examine a selected

accounting unit predominantly operating in trade during 2011 and 2015. Per Drábkova,

there were significant discrepancies between the generation of earnings and an increase in

cash flow. The detection and evaluation of the effects of accounting errors and frauds for

a selected accounting unit negatively affected the reliability of financial records.

Alali, Sophia, and Wang (2017) set out to analyze how financial reporting quality

affected trends in restatements and frauds from 2000 to 2014. This analysis period

included the passage of the Sarbanes-Oxley Act of 2002, which enacted financial

disclosures to restore public confidence in the U.S. capital markets following significant

accounting scandals in the early 2000s. Using compiled data from across the public

reporting sphere, Alali et al. discovered that financial frauds were considerably lower

than financial restatements during the analysis period. Jan (2018) added that the

incidence of companies with both false financial restatements and frauds detected might

affect the viability of the business. The conclusions of Alali et al. are consistent with

prior studies on the trends of restatements of financial statements.

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Bhasin (2013) used a qualitative case study to explore and describe fraudulent

financial reporting practices in the most significant fraud cases in India, which involved

Satyam Computer Services, labeled as “India’s Enron” by the Indian media. Bhasin

wanted to highlight the increasing rate of white-collar crimes and claiming stiff penalties,

exemplary punishments, and effective enforcement of the law with the right spirit. Per

Bhasin, the Satyam Computer’s creative-accounting scandal brought to limelight the

importance of ethics and corporate governance. Williams (2018) echoed that the

Sarbanes-Oxley Act of 2002 is improving corporate governance and decreasing the

incidence of fraud in the current business context. In recent studies and survey analysis,

some researchers indicated that investors and corporate managers continue to have

concerns about financial statement fraud (Prescott & Vann, 2018; Roychowdhury &

Srinivasan, 2019). According to Bhasin (2013), many employees who commit financial

statement frauds are senior managers, middle and lower-level managers, and

organizational criminal activists. Zerban (2018) opined that CEOs and chief financial

officers (CFOs) committed accounting frauds to conceal real business performance,

preserve personal status and control, and maintain high personal income and wealth.

Middle and low-level employees falsified financial statements related to their area of

responsibility like a subsidiary, division, or service, to conceal poor performance and to

earn performance-based bonuses. In his conclusion, Bhasin revealed that the CEOs and

the company’s global head of internal auditors used several different techniques to

perpetrate fraud in the company. Nigrini (2019) opined that creating false bank

statements and falsifying bank accounts to inflate the balance sheet and income statement

36

are acts that may envisage up to 10 years in prison and million dollars fines for

fraudsters. Real managers should hire credible and loyal agents in the finance and

accounting services to prevent the falsification of financial statements.

Salem (2012), on the other hand, sought to answer some questions relevant to

fraud detection and technology associated with fraud prevention in the computer systems.

Salem, in his analysis, wanted to categorize fraud, learn the motivations behind the fraud,

the nature of the organization, and individuals involved in computer misconduct

practices. Zhang (2018) noted that auditors have a more prominent role in uncovering

fraud and must be vigilant in the execution of their responsibilities by ensuring the truth

in their analysis. Zhang further identified common symptoms of acts of fraud and argued

that real auditors should be acutely aware of acts, types, and symptoms of fraud. Tunley,

Button, Shepherd, and Blackbourn (2018) echoed that those likely to commit fraud are

mostly corporate officers and other employees in the positions of responsibility in

accounting and data analysis processing. A reliable system of internal control is the most

effective way of fraud prevention (Li, Dai, Gershberg, & Vasarhelyi, 2018). Managers

may prevent fraud in exploring new computer technology as well as improving computer

security within the organizational systems.

The exact nature of fraud is very complex to master. Free and Murphy (2015)

used an inductive analysis to investigate the reasons why individuals co-offend in fraud.

Based on the interview with 37 convicted fraudsters, Free and Murphy found that the

reasons for instigating co-offender frauds vary according to the nature of ties between co-

offenders in the commission of fraud. Bishop, Hermanson, and Riley (2017) echoed that

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the key differences between the primary beneficiary and the qualitative nature of fraud

were factors that motivate individuals to propose or accept an offer to participate in fraud.

For maintaining shareholders’ trust, managers must master the concept of the triangle

theory (Greve & Pedersen, 2017; Hung & Cheng, 2018; Lenz & Graycar, 2016). Under

the triangle theory, managers who understand the true nature of fraud have the chance to

increase stakeholders’ satisfaction. Effective business managers need to understand

individual fraud motivations to mitigate fraud and ensure the best future of the

organization.

In response to calls for more research on how to prevent or detect fraud, Murphy

and Dacin (2011) developed a framework to identify psychological pathways to fraud.

Per Murphy and Dacin, multiple theories relating to moral intuition and disengagement,

rationalization, and the adverse effect of fraud were three psychological pathways that

lead to fraud. The purpose of developing a psychological framework by Murphy and

Dacin was to draw attention to under-researched aspects of ethical decision-making and

to increase the understanding of psychology in committing fraud. Lokanan (2015) echoed

that, when individuals have an opportunity and pressure to commit fraud, there are three

psychological pathways to fraud nestled within attitude or rationalization. To Lokanan,

the lack of awareness, intuition coupled with rationalization, and reasoning are

psychological pathways to fraud. Similar to the fraud triangle theory, understanding the

psychological mechanism of fraud is critical for effective business leaders to prevent

fraud in their organizations.

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It is paramount for business leaders to identify certain insidious situational factors

in which individuals commit fraud and to extend the knowledge of rationalization to

reduce the negative effect on accompanies’ performance (Lokanan, 2015). Ekhomu

(2015) opined that several other methods to reduce fraudsters’ practices exist and could

serve as potential psychological red flags to predict future fraudulent behavior. For

example, managers can motivate employees to suggest in open meetings any constructive

idea to increase job satisfaction. Job satisfaction is an essential factor in increasing

performance and psychological satisfaction in the workplace (Bin, 2015; Boskovic, 2017;

Guest, 2017; Wu et al., 2017). Nonprofit leaders can use the psychological framework as

a theoretical foundation to explore several interventions to mitigate fraud.

Writing on financial accounting fraud, Sharma and Panigrahi (2012) argued that

with an upsurge in financial accounting fraud in the current economic environment,

financial accounting fraud detection became an emerging topic of great importance for

academic and industrial researchers. Cao, Chychyla, and Stewart (2015) stated that the

failure of an internal auditing system of the organization in identifying accounting frauds

led to the use of specialized procedures to detect financial accounting fraud. However,

dealing with large data volumes and complexities of financial data are significant

challenges for forensic accountants (Jackson, 2017; Vasarhelyi, Kogan, & Tuttle, 2015;

Taminiau, Heusinkveld & Cramer, 2019). Sharma and Panigrahi’s finding was a

comprehensive review of the literature for the detection of financial accounting fraud and

indicated that logistic models, neural networks, Bayesian belief networks, and decision

trees were appropriate for the detection and classification of fraudulent data.

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Similarly, Soleymani et al. (2018) used an unsupervised data-mining algorithm

and implemented an outlier detection model to assist experts in detecting medical

prescriptions suspected of fraud. Data sets included information about the insured,

prescribed medicines, and information about medical providers in 2013. The findings of

Soleymani et al. indicated that the data-mining algorithm could help accurately detect

potential fraud cases in medical prescriptions and reduce the number of medical

prescriptions and investigators’ heavy workloads.

Kaplan, Pope, and Samuels (2015), on the other hand, studied what influences

fraud reporting in organizations. Kaplan et al. noted that only a fraction of employees

who discover fraud report it to managers. Given the severe consequences of fraud, a

better understanding of the factors influencing individuals’ intentions to report fraud is

crucial, particularly to a non-anonymous recipient such as a manager. Peltier-Rivest

(2017) stated that reporting fraud to a manager must be a procedural safeguard to sustain

business longevity. However, the fraud triangle theory helps to master the type of fraud

and its effects on business growth.

Lack of transparency leads to fraud (Jackson, 2017). Kaplan et al. (2015)

contended that employees are the primary sources from which frauds occur. Kaplan et al.

also indicated how managers should handle a fraud report to promote productivity. The

conclusion of Kaplan et al. was consistent and aligned with previous research, which

showed that participants make stronger attributions to a person engaging in

misappropriation of assets compared to a person engaging in fraudulent financial

reporting.

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The causes and consequences of fraud in profit organizations are numerous.

Pamela et al. (2016) used a survey to combine three groups of individuals who had fraud

experience. Pamela et al. surveyed prisoners who committed fraud within an

organization, individuals who audited or investigated fraud within an organization, and

individuals who witnessed fraud within their organization. In their analysis, Pamela et al.

found that 39 % of the respondents agreed that an instrumental climate was present when

the fraud occurred within the organization. Tepper, Simon, and Park (2017) argued that

an instrumental climate is significantly associated with a malevolent work environment

like being mistreated and social incentives and pressures. Pamela et al. found that

substantial support for the use of externally oriented rationalizations and an instrumental

climate are the claims that help employees to perform acts that benefit organizations. The

study also revealed that an instrumental climate is not associated with conventional

attitude variables like the prior history of white-collar crime, character, or ethical values

of the perpetrator or internally oriented rationalizations such as minimizing or ignoring

the consequences of the fraud or individual greed or need. Cao et al. added that

employees within instrumental climates make decisions based on their self-interest or in

the interest of the organization to the detriment of others. Referencing the fraud triangle

theory, the conclusion of Pamela et al. is a good explanation of employees’ fraudulent

behaviors in profit organizations.

Ethical climate theory is a crucial concept that contributes to mitigating fraud.

Brown, Hays, and Stuebs Jr. (2016) stated that the fraud triangle theory offers an

insightful theoretical framework for investigating an organizational climate that

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experiences fraud. The use of ethical climate theory was appropriate because empirical

work in ethical climate theory has identified five distinct climate types within

organizations. The five climate types are instrumental, caring, independent, rules, and law

and code (Pamela et al., 2016). The analysis of Pamela et al. was significant about fraud

investigation, and managers may explore the concept of fraud to implement new

strategies to improve and sustain the business.

Ethical behavior is an essential factor in fraud analysis. Krause (2016) discussed

the gray areas of health care fraud and found that medical frauds have a direct effect on

federal government health care programs. Gordian and Evers (2017) opined that

corruption in the healthcare industry has increased the last past 5 years and resulted in

many medical devices recalls affecting people healthcare. Government leaders and

business managers should improve and promote ethical behaviors for the welfare of the

entire local communities. As explained above, Krause’s analysis referred to the fraud

triangle theory and contributed to the prevention of businesses collapsing from fraudulent

activities.

Fraud in Nonprofit Organizations

Effective leaders sustain their business activities by complying with the

company’s policies and government regulations. Writing on fraud in nonprofit

institutions, Murphy (2015) explained that some nonprofit organizations have a unique

environment that can contribute to fraud. Common characteristics such as an outlook of

trust, significant control by a limited number of people like founders, executive directors,

or CEOs, can contribute to the likelihood of fraud (Girgenti & Hedley, 2016). McDonnell

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and Rutherford (2018) added that limited human and financial resources, reliance on

volunteers, higher turnover, and weak internal controls are among the primary factors that

contribute to fraud in nonprofit organizations. Ammar (2017) opined that managers for

nonprofit organizations could use and explore different strategies to prevent fraud and

ensure effective control to achieve a company’s mission and goals. Goreva, Luther, and

Bromall (2013) analyzed how the adoption of accounting information systems has

contributed to the incidents of embezzlement in small nonprofit organizations. Goreva et

al. estimated the annual losses for fraud to nonprofit organizations at 6% of fund-raising

revenues, 13% of operating budgets, and the total annual losses at $40 billion. In their

conclusion, Goreva et al. found that risk management, theft, fraud, and embezzlement in

nonprofits are increasing each year. It is critical for nonprofit organization managers to

assess regularly all risks related to fraud for the longevity of their organization.

Fraud has become a cause of concern despite the nature and type of organizations.

Dzomira (2014) stated that nonprofit entities must promote good governance and trust

among organizational members. The fraud schemes, which occur in commercial and

other trading organizations, are also typical in nonprofit organizations (Zack &

DeArmond, 2015). Dzomira (2014) noted that nonprofit making sectors have a crucial

role to play in satisfying the desire of the social community, whether it is religious,

health, cultural, or other human service organizations. Murphy (2015) echoed that

nonprofits agencies do not operate on a commercial basis and mostly rely on members’

subscriptions and contributions. The capital of nonprofit organizations come from public

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or private grants or other fundraising events. Managing and preserving such entities’

resources are in the hands of the boards and officers.

Internal control is equally an essential function to any organization, whether

profit-oriented or non-profit oriented. Gottschalk (2016) argued that in nonprofit

organizations, the internal control has a crucial role in ensuring stakeholders about

reliable information regarding donor funds, grants, and fundraising, while in profit

organizations, audit and control assess risk management and prevent accounting

irregularities. It is the internal control function, which defines whether the policies,

procedures, and practices designed and approved by organizational managers and the

board are operating correctly. Dzomira (2014) echoed that the role of internal control is

to provide reasonable assurance regarding the effectiveness and efficiency of operations,

reliability of reporting, and compliance with the applicable laws and regulations. Per

Dzomira, nonprofit entities lie in good stewardship, transparency, and accountability of

the board and management. Administrators of nonprofits organizations must always be

vigilant on fraudulent actions, which may include cash theft, expense account fraud,

misuse of organizations’ intellectual property, and inventory theft (Kaplan et al., 2015).

As stated by Alali, Sophia, and Wang (2017), most of the nonprofit organizations do not

have efficient internal controllers, officers, and other relevant staff to monitor the controls

and establishment of an ethical code to ensure organizational effectiveness.

Sound internal control is vital for nonprofit organizations. Dzomira (2014) noted

that there are five components of internal sound control. Per Dzomira, the five

components are (a) control environment, (b) risk assessment, (c) control activities, (d)

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information and communication, and (e) monitoring. Furthermore, Dzomira (2014)

explained that the context of internal controls embodies the organization’s principles,

trust, values, norms, and culture. Internal controls should refer to systems of policies and

procedures that provide safeguard to an entity’s assets and other resources usable by the

organization, accurate and reliable financial reporting, regulations compliance, and

effective operations (Susanto, 2017). According to Raval (2018), internal sound control

includes the safe custody of funds received by cashiers, accurate, and timely financial

expenditures reporting. The board members and senior management should review and

adopt the completion of annual audited financial statements before public disclosure.

Therefore, internal controls focus on an organizational risk assessment, general oversight

provision, and reporting on the nonprofit entity’s control position.

Frauds committed against and by employees of nonprofit organizations can be

internal or external to the organization. Arend, Sarooghi, and Burkemper (2015) stated

that internal frauds include asset misappropriations, revenue, and cash receipts. Theft-

involving cash occurs when an individual takes money for personal use and does not

usually appear in the accounting books (Gordian & Evers, 2017). For example, the

perpetrators could be the person either who collects the cash, opens incoming emails,

logs in cash receipts, manages bank deposits, or collects cash from financial agencies.

Theft of donated items or goods is a lack of proper records on donated merchandise by

most nonprofit organizations, especially religious entities such as churches. It is via such

slackened controls that the perpetrators take advantage of the lack of controls to commit

fraud (Dzomira, 2014; Ho & Mallick, 2017).

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The other forms of internal fraud in nonprofit institutions include purchasing and

cash disbursement, using, for example, a credit card abusively. The fraudulent use of

organizations’ cards for personal use by the perpetrators is a negative behavior to the

organization. Dzomira argued that using ghost or fictitious vendors is common in most

nonprofit organizations, and fraud can occur while employees create, for example, a fake

supplier company and submit fake invoices for payments. In addition to fraud in

nonprofit companies, there is the fraud of payroll padding and employee expense

reporting and ghost employees. This is a simple act in most nonprofit organizations

whereby either maintaining laid-off employees or setting up fictitious employees on the

payroll. The perpetrator cashes the checks made out to these fake employees (Dzomira,

2014).

In addition, the staff of nonprofit organizations can create fictitious expenditures.

For example, creating fake invoices or working hour’s overstatement for later

reimbursement or payment. The responsible employees can claim more than the worked

hours by their juniors and make a fake agreement between the supervisor and the junior

to steal the company. Arend et al. explained that other asset misappropriations embody

personal use of the organization’s assets or resources. For example, employees using the

organization’s computers, software, and printers for personal projects are negative

behaviors or fraudulent practices. Dzomira opined that using personal long-distance

telephone calls, utilizing the organization’s internet access and e-mail for personal use,

using the organization’s photocopier to make copies of personal documents are new types

of fraud in the modern work environment.

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External frauds perpetrated in nonprofit companies may include vendor or

supplier frauds. For example, a nonprofit entity might inflate or overstate fundraising

costs to programs to overstate expense ratios. Gordian and Evers stated that failure, for

instance, by donors to comply with the given requirements pertaining to donor funds

usage or misrepresenting the portion of donations are fraudulent practices. Nonprofit

organizational leaders should be aware of the consequences of noncompliance with

business policies to secure their organization from penalization.

Frauds committed by nonprofit managers may be intentional false financial

reporting. By creating a false assertion about financial statements, it would include, for

example, misleading donors through expense misclassifications regarding program funds

usage or restricted donation misclassifications. Roychowdhury and Srinivasan added that

non-disclosure of financial party transactions or revenue inflating through holding

records open beyond the period end are fraudulent practices. Fraud in nonprofit

organizations can also arise from failing to value receivables, inventory, donated assets,

and gift annuity obligations (Dzomira, 2014). Gottschalk (2016) analyzed the fraud

examination report written by the inspector general about Padakhep Manabik Unnayan

Kendra (PMUK) in 2012. PMUK is a nonprofit organization in Bangladesh, which

received $5.2 million US dollars from Save the Children association to prevent and

protect children against HIV/AIDS in Bangladesh. After an audit of financial statements,

the inspector general found that PMUK engaged in a scheme to divert the grant funds

disbursed under the HIV/AIDS program and revealed a loss of funds for $1,894,426. The

fraudster concealed the diversion through fabricated documents, including a set of

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manufactured books and records to justify withdrawals that never actually took place, and

then withdrew funds separately (Gottschalk, 2016). Per Gottschalk, the fabricated and

falsified bank statements that led to a loss of money were evidence of fraud and affected

the company’s credibility.

Writing on internal controls in nonprofit organizations, Patterson and Kuperus

(2016) argued that complaining about embezzlement and mismanagement of funds from

religious organizations, particularly in churches, are increasing in the local communities

and need more attention of donors and official authorities. Such disgraceful acts have

raised many concerns about the effectiveness of internal control systems in churches.

Ahiabor and Mensah (2013) echoed that many churches have the perception that all

Christian workers are honest and sincere; hence, there are many cases of theft and fraud,

which are revealed or investigated by churches’ members. The donors also have the

perception that they are contributing to God and not a man, and all they want in return are

blessings from God; hence, they do not know what church leaders do with their

donations. Per Ahiabor and Mensah, many churches do not have internal controls to

hinder the effectiveness of church officers and employees. Church leaders need to rely on

external controls to prevent conflicts to ensure donors’ trust (Patterson & Kuperus, 2016).

However, Bennett and Hatfield (2018) noted that nonprofit leaders, including

pastors and religious leaders, should be aware of external audits to ensure that financial

controls and fraud prevention are adequate. The ACFE reported that less than 10% of

frauds discovered are the result of an audit by an independent accounting firm. On the

other hand, Yee, Sujan, James, and Leung (2017) used an empirical study and purposeful

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sample of 83 Singaporeans from 25 organizations to analyze the role and effectiveness of

internal auditing on customers. Based on Marxist economic theory, the authors found that

auditors in profit and nonprofit organizations give greater scrutiny to items audited and

have a responsibility to give reasonable assurance that there are no material

misstatements in financial statements. Active nonprofit managers should have an absolute

responsibility for mitigating fraud and promoting auditor’s review and test financial

controls to ensure efficient control.

The purpose of an internal or external audit is to make sure that the management

staff is acting in the best interests of the organization (Patterson & Kuperus, 2016).

According to Moore (2016), nonprofit managers are the guiding eyes and responsible for

policies and legal compliance. Kotsanopoulos and Arvanitoyannis (2017) echoed that

complying with company, local, state, and federal regulations promote success and

development. Nonprofit leaders must encourage their employees to give feedback about

the code of conduct and suggest new insights to promote confidence in the workplace

(Sebastiano, Belvedere, Grando, & Giangreco, 2017). To mitigate fraud, effective

nonprofit leaders should use efficient managerial tools to oversee, listen, and

communicate effectively to deter fraudulent behaviors in their organizations.

Transition

In section 1, I presented the background, problem statement, purpose statement,

nature of the study, research question, and interview questions related to my study. I also

introduced the conceptual framework, operational definitions, assumptions, limitations,

delimitations, and significance of my study. Further, I presented the review of the

49

professional and academic literature, which described the concepts of fraud triangle

theory and addressed causes, consequences, and impacts of fraud on nonprofit

organizations’ performance.

In section 2, I presented a restatement of the purpose statement, the role of the

researcher, participants, and research method and design. I also described the population

and sampling, ethical research, data collection instruments and techniques, data

organization and analysis, and discuss data consistency and credibility in qualitative

analysis. In section 3, I presented the findings, the implications for social change, and the

recommendations for nonprofit leaders to mitigate fraud in their organizations. I also

formulated recommendations for further research and presented the conclusions of my

study.

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Section 2: The Project

The primary purpose of this qualitative study was to identify strategies nonprofit

organization leaders used to mitigate fraud in their organization. Mitigating fraud should

be the primary goal of nonprofit managers who want to reach success and meet the

organization’s goals (Ge et al., 2017). As the primary researcher and data collection

instrument, my role was to collect data from five nonprofit agencies managers who have

more than 5 years of experience in their respective organizations. I used interview

techniques with open-ended questions and methodological triangulation to collect and

analyze data from the participants. I also included reliability and validity strategies to

increase the credibility of my research and comply with the ethical standards for

confidentiality and participants’ protection during the research processes.

Purpose Statement



The population for this study included executive leaders of five nonprofit community

action agencies in Maryland who have implemented strategies that have successfully

reduced fraudulent financial activities. The contributions to social change are aiding

executive leaders in developing processes and procedures that advocate for better policies

and providing strategies to reduce fraudulent financial activities, promote corporate

responsibility, and influence the performance and positive outcomes of programs. The

contributions for social change can support the success of programs such as Head Start,

tax preparation, and adults’ and children’s education in local communities.

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Role of the Researcher

A researcher’s role is to identify participants; collect, organize, and analyze data;

and present the findings (Yin, 2017). As the primary researcher, I selected organizations

with leaders who had a personal interaction and conversation with the study population.

To collect credible and specific information related to my study, I used an interview

protocol (see Appendix A), which is an instrument that researchers use to collect rich and

detailed qualitative data for understanding participants’ experiences (Patton, 2015). My

experiences and knowledge of working for 14 years as an accountant and chief financial

officer in a nonprofit organization were beneficial to understand fraudulent behavior in

the current business context and avoid possible bias in analyzing and interpreting my

findings. Mitigating biases is critical for demonstrating research credibility and

consistency (Baker, 2016; Bromley, Mikesell, Jones, & Khodyakov, 2015). Though as a

novice researcher, I did not have prior experience in academic research to mitigate

potential biases that could influence the results of my study, for my research, I used the

member-checking technique to improve my research consistency and credibility.

My additional roles consisted of adherence to Belmont Report Principles, which

recommend treating participants with respect, justice, and beneficence and secure the

data for the confidentiality of participants. As the study involved the use of human

subjects, compliance with ethical principles was essential. Before collecting data from

participants, I received study approval from the Institutional Review Board (IRB) of

Walden University. The IRB process is critical to prevent the study’s risks and promote

the research’s consistency (Freed et al., 2016). Additionally, for the research credibility, a

52

researcher should adhere to ethical principles and prevent issues like participants’

autonomy, anonymity, confidentiality, beneficence, non-maleficence, and justice (Rogers

et al., 2015). For my research consistency and credibility, I sought the consent of the

participants by explaining to them the procedures of the study and their rights to

withdraw from the study at any time during the research processes.

I also remained aware of personal biases throughout the data analysis processes,

such as personal beliefs and biases regarding the study topic from participants who

worked for former employers. Awareness and management of personal biases ensure the

integrity of the data collection and analysis process (Ulrich et al., 2015). I sought

unbiased interview techniques when conducting all interviews. The interview questions

were neutral and open-ended. Interviewees had the same length of time to respond to

each interview question and provide their perspectives and insights on fraudulent

activities in their organizations.

Participants

In qualitative research, selecting appropriate participants is critical for presenting

a sound analysis (Yin, 2017). Selecting reliable participants is critical for a researcher to

collect valid information (Hassan, Nadzim, & Shiratuddin, 2015). The participants in this

study were executive leaders of CAAs in Maryland. I selected participants who were able

to understand and respond to the research question. I used a purposive sampling method

and Google search engine to select a sample size of five executive leaders who have

implemented strategies to reduce the frequency and effects of fraudulent activities in the

CAAs. I referred to the eligibility criteria to select my participants. The eligibility criteria

53

were top executive nonprofit leaders or managers who have business and fraud mitigation

experience in their organizations. Executive leaders and officers had more than 5 years of

managerial and leadership experience among a population of CAAs located across the

state of Maryland. Building a healthy relationship between a researcher and participants

to collect information using a qualitative methodology is important to the effectiveness of

the study (Cunliffe & Alcadipani, 2016). Developing trusting relationships with

participants is a pathway to gaining access to interviews for your study (Taylor, Bogdan,

& DeVault, 2016). For my research, I was honest and open to build trust with

interviewees to collect reliable and credible information about using the fraud triangle

theory to respond to the research question.

Research Method and Design

Research Method

The three research methodologies are quantitative, qualitative, and mixed

methods (Hyett, Kenny, & Dickson-Swift, 2014). Researchers use a quantitative

methodology to measure variables, test hypotheses, analyze causal relationships between

variables, generate value-free predictions, and generalize the research outcomes

(Makrakis & Kostoulas-Makrakis, 2015). In this study, I was not testing a hypothesis or

looking for causal relationships; therefore, quantitative method was not appropriate for

the study. In contrast, researchers use qualitative methodology to collect information

from participants who lived and experienced the phenomenon analyzed (LeRoux, 2017).

A qualitative methodology was appropriate for this study to collect reliable information

about what participants think about mitigating fraud in their businesses. Qualitative

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research is critical to reveal alternative concepts regarding a real business problem, which

emphasizes the socially constructed nature of reality, holism, exploration, flexibility,

meaning-making, and understanding of the business problem (Makrakis & Kostoulas-

Makrakis, 2015). Some researchers have used mixed methods research to combine both

qualitative and quantitative methodologies to address the research question (Guetterman,

Fetters, & Creswell, 2015), but using a mixed methodology was not appropriate for my

study because I did not generate two types of data outcomes.

Research Design

In this qualitative study, the design I used was a case study. In case study

research, the researcher provides a combination of structuring the research and the

significant parts to show how the research project work together to address the research

question (Trochim, 2006). Case study research constitutes an all-encompassing method

that covers the logic of design, data collection techniques, and specific approaches to data

analysis (Yin, 2017). High-quality case study research is focused on rigor, validity, and

reliability as well as evaluation (Yin, 2017).

Phenomenology is the empirical study of the different ways in which people

understand various phenomena in the world around them and how these ways of

understanding relate to one another (Stenfors-Hayes, Hult, & Dahlgren, 2013).

Phenomenology is a research method for mapping the qualitatively different ways in

which people experience, conceptualize, perceive, and understand various aspects of

phenomena in the world around them (Stenfors-Hayes et al., 2013). Because the results of

a phenomenological analysis are the description of the essence of the lived experience of

55

a given phenomenon, it was not an appropriate design for the study because I was not

seeking to study past or convicted officials involved in fraud but current serving officers

of CAAs.

Additionally, narrative designs are used to describe in chronological order

individuals’ experience and life story (Lawrence & Tar (2013). In the ethnography

design, researchers use observation to analyze the culture of individuals (Ingham-

Broomfield, 2015). Narrative and ethnography are job-oriented and depend on the

researchers’ skills (Chien & Hassenzahl, 2017; Hallett & Barber, 2014; McKim, 2017).

For these reasons, ethnography and narrative were not appropriate for this research.

In qualitative research, some researchers often concern the development of

concepts that help understand social phenomena in natural settings by emphasizing the

meanings, views, and experiences of their participants. The analysis of qualitative data

represents one of the more challenging aspects of qualitative research (Kaczynski,

Salmona, & Smith, 2014). During my research analysis, I remained open to multiple

paths of meanings and more in-depth insight and the concurrent interplay between

inductive and deductive reasoning. To achieve data saturation, I ensured participants

respond in-depth to all interview questions and there was no new information emerging.

The case study design was useful to get answers for when, what, how, and why questions

to respond to the research question.

Population and Sampling

Researchers use a purposive sample to select participants according to the needs

of the study (Robson & McCartan, 2016). To answer my research question, I used

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purposive sampling to recruit participants who knew the impacts of fraud in organizations

and who had managerial experience for more than 5 years of leading a CAA. Purposive

sampling is a useful technique to identify and select individuals knowledgeable about a

phenomenon analyzed and obtaining reliable information related to participants’

experiences (Palinkas et al., 2015). The state of Maryland has 17 CAAs. I used the

Google search engine and explored official reports and sources to know, locate, and

select participants who met the eligibility criteria.

The eligibility criteria included (a) be a top executive manager of CAAs with a

minimum of 5 years of managerial experience, (b) have more than 5 years of business

activities in Maryland, and (c) be a member of a CAA. After selecting the participants, I

sent an invitation letter and the informed consent form before organizing the interview

with each participant. For the credibility of my study, I organized the interviews at the

participants’ location. I ensured that the place was quiet to avoid any noises and

distractions. I also ensured the place was clean, clear and there was a good visibility to

read and write the summaries. After each interview, I identified new emerging themes

and collected new information until reaching data saturation. Data saturation is the

process of gathering data until reaching the point where there is no new information

arising to answer the interview question (Richards, 2015). My expectation of reaching

data saturation was after interviewing the fifth participant.

I worked for one of the CAAs in Maryland, where I led the office of planning,

evaluation, and research. My personal experience as a researcher was useful to use in-

depth interviews with the top executive leaders to collect data for this study. The results

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of this research could aid other nonprofit executive leaders in developing processes and

procedures and advocating for better policies that reduce fraudulent financial activities.

Ethical Research

During a research study, researchers may face some severe or ethical issues when

interacting with participants (Greenwood, 2016). Ethical norms are general

considerations that a researcher must consider during research processes to preserve the

privacy and confidentiality of participants (Greenwood, 2016). Professional

organizations, research centers, and government agencies have regulated ethical

standards to protect participants and researchers during a research analysis (Hammersley,

2015; Haron, Ismail, & Abdul-Razak, 2011). It is crucial for both researchers and

participants to understand ethical standards for the credibility of the research (Robson &

McCartan, 2016). For the credibility of my research, I protected participants’ identities by

using codes P1, P2, P3, P4, and P5 to classify, identify, and categorize participants.

I also complied with the IRB that is responsible for ensuring that all Walden

University researchers comply with the university’s ethical standards as well as U.S.

federal regulations. IRB approval is required before the collection of any data begins;

therefore, I applied for IRB approval before the data collection process started. My IRB

approval is 04-08-20-0593098. Obtaining informed consent and maintaining participant

confidentiality are requirements for obtaining approval from the IRB (Yin, 2017). For

participants’ confidentiality and data protection, I protected and secured data in a locked

file cabinet for a minimum of 5 years for a potential audit before their destruction. After 5

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years from my graduation date, I will use a shredder machine to destroy the interview

summaries, notes, and all information related to my research.

After obtaining IRB approval, I selected five participants, sent them an e-mail,

and gave them a phone call for the first contact to determine if they agreed to participate

in the study. I also sent them an informed consent form to comply with ethical

procedures. The informed consent form included the background information of the

study, outlined the expectation of participants, and provided details about the intent of the

study. The informed consent is typically a disclosure of the purpose of the study,

confidentiality of data, and statements that the data collected will be stored in a safe place

and used for only the intended purpose of the research. Moreover, I explained to the

participants that they could withdraw from the study at any stage of the research without

a penalty and assured that the study would not have any adverse impact on participants.

Moreover, I did not offer incentives to participants in this study and ensured to avoid

ethical and legal consequences when storing and securing my research information. I

secured participants’ signatures on the informed consent form for their permission in the

study. I encouraged participation in this study and highlighted the potential value that

could help other nonprofit CAAs to mitigate fraudulent financial activities.

Data Collection Instruments

For this study, I was the primary data collection instrument. The primary data

collection method for this qualitative multiple case study was a face-to-face interview

with semistructured questions. I chose semistructured interview questions because it gave

me the ability to prepare the questions ahead of time. I also consulted organizational

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documents, archival materials, and the organization’s website content about fraud, as case

studies include the collection of data and information from multiple sources (Yin, 2017).

I used an interview protocol (see Appendix A) to create an overall picture of how

leaders in CAAs practice fraud reduction in their organizations. The participants included

leaders of five CAAs in Maryland. I requested permission from Walden University IRB

before conducting data collection (Yin, 2017). I contacted each participant with a written

letter and followed up with a phone call to set up the date and time for the one-on-one

interview. I asked participants for permission to record the interview and requested they

sign the informed consent form. Each participant received a copy of the informed consent

form and a demographic questionnaire to better understand and complete the interview

questions With their permission, I conducted and audiotaped the semistructured

interviews at the participant’s quiet and discrete office to conduct the interview with

success. The quality of the data also depends on the credibility of its sources (Mayer,

2015), which is why I audiotaped and transcribed the interviews. The use of open-ended

questions also ensured the collection of reliable and valid information (Vaughn & Turner,

2016). During the interview process, I also recorded notes of the answers given. After

asking each question, I used member-checking by sending participants a summary of the

interview for review to ensure the accuracy and clarity of the participants’ answers

(Harvey, 2015; Silverman, 2017). For consistency of my data, I also watched and

recorded any participant nonverbal cues and interview interruptions.

Researchers use member checking and triangulation to increase the credibility,

reliability, and validity of data collection processes in qualitative analysis (Caretta 2016;

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Varpio, Ajjawi, Monrouxe, O’Brien, & Rees, 2017). The semistructured interview

questions generated rich, dense, and focused information that allowed me to provide a

convincing account of the problem under study. Given that the researcher and the

interviewees are the interactive sources of information in interview-based qualitative

studies, verbal fluency, clarity, and explicatory and analytical abilities are central to the

possibility of gathering in-depth information (Jamshed, 2014). The general aim of the

one-on-one interview protocol is to adopt an in-depth semistructured or conversational

method of interviewing style-allowing participants to speak freely about fraud and fraud

prevention programs in their organizations (Silverman, 2017).

For triangulation and knowledge gathering, I gathered and collected additional

sources from general information and organizations’ websites. I used the organizations’

public annual audited financial report to highlight their financial statements that

communicate its financial position, organizational programs, financial outcomes, funding

sources, and internal controls processes. Generally accepted accounting principles are the

measuring component for outcomes of businesses, organizations, and operations. There

are sections in the audit report that highlight audit findings or no audit findings and

whether the organization has the proper internal controls in place to meet generally

accepted accounting principles, mitigating fraudulent activities, and occurrences. The

auditors provide an opinion based on their review and certification. The organization’s

public audit report was one of the reporting tools and measurements for this study.

I used member checking to increase the validity, credibility, and transferability of

research techniques. Participants received a summary of their interview for review,

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clarification, and suggestions of any other elements that were relevant to the study. Pre-

triangulation included the use of findings from the review of documents obtained from

their records and archives. Triangulation is typically a strategy for improving the validity

and reliability of research findings and strengthens a study by combining methods

(Wilson, 2014). In this study, I used data source triangulation to see if what I was

reporting carried the same meaning when found under different circumstances.

Data Collection Technique

The primary sources of data collection are observations, semistructured

interviews, documentation, and audio-visual sources (Yin, 2017). O’Keeffe, Buytaert,

Mijic, Brozovic, and Sinha (2015) argued that using a semistructured interview is more

reliable than other sources in collecting information from credible sources at a reasonable

cost. I used semistructured interviews with open-ended questions to generate discussions

about the topic and ensure the interview aligns with the research question. I used an

audio recording device to record the interviews as my secondary support to mitigate

biases and ensure the reliability of transcribed interview-responses. The interviews took

place in the offices of the participants. Before the one-on-one interviews start, I referred

to the interview protocol (see Appendix A) and ensured participants read and signed the

informed consent form.

I established rapport through the introductory stage with each participant to

stimulate participants’ confidence and willingness to participate in the study. Castillo-

Montoya (2016) argued that the aim of using an interview should be to encourage the

respondents to speak personally and freely about the topic. Participants responded freely

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to seven interview questions from which I collected data to analyze strategies to mitigate

fraud in CAAs. I ended the interview with a closing remark to thank each participant. I

planned 5 weeks to collect the data from the five executive leaders of the CAAs. I used a

Sony recording device recorder for the participant interviews to transcribe and analyze

the data collection.

Collecting qualitative data can present some advantages and disadvantages (Yin,

2017). One of the advantages associated with qualitative data is that such data are

amenable to member checking and triangulation. Member checking and triangulation

allow participants to verify their responses and collecting data through two sources,

interview, and archival documents (Birt, Scott, Cavers, Campbell, & Walter, 2016;

Carroll & Huxtable, 2014; Suen, Huang, & Lee, 2014). I used documents and archival

records obtained from the agencies to validate the findings of the interview. Since

interviews were time-consuming, the documents and archive records supported and

helped in providing accurate and complete information to shorten the duration of

interviews. Preceding each interview process, I ensured the voice recorder was

functioning correctly and that the battery or the dry cells were in good condition.

Before the commencement of the interviews, the aim and design of the study

included the submission to the Walden University IRB for approval since I was using

human subjects (Yin, 2017). Upon receiving approval of the study by the Walden

University IRB, I selected study participants using purposive sampling. After the

approval by the Walden University IRB, I organized and prepared my interviews. The

interviews were open-ended questions to allow participants to respond freely (Appendix

63

B). I conducted member checking by asking each participant to review the summary of

the interview data and ensure the accuracy of the information collected from participants’

answers.

Data Organization Technique

Researchers organize data for providing transparency and preparing proper data

analysis (Yin, 2017). Yin argued that researchers use data organization techniques to

organize data by themes, trends, and patterns for easy understanding and reviewing of

data before analysis. Lewis (2015) argued that researchers should organize data to meet

research requirements and achievements. At Walden University, the institutional review

board members require researchers to secure data during the research processes and keep

them secured and locked for 5 years after the date of the research completion for a

potential audit (Walden University, 2016). For strategic and security reasons, researchers

should not share any information with individuals not involved in the research processes

before the official research publication (Greenwood, 2016). For my research, I stored

interview summaries, notes, and research journals in different folders with a protected

identification code for each participant. I also secured my data on a flash drive and

computer hard drive in a locked file cabinet accessible only by myself.

For my research, I verified and sorted the interview responses into categories by

themes and sub-themes. For confidentiality, each participant and transcript had an

identification code known only by myself. Transcriptions of participants’ data were

verbatim, except with any data or information that contradicts confidentiality. I removed

any conversation that was not relevant to the study through the transcription review

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process of the data for accuracy. I used NVivo software to develop codes and themes

from raw data directly. Zamawe (2015) revealed that using NVivo software is critical to

mitigate research bias when converting interviews into summaries and to codify themes

into categories. I also used the journals to record dates and events happenings, as well as

folders to keep interview data of each participant separately and in a secured place. For

my data protection, I labeled all files, copied files on CDs and flash drives, assigned a

secret code to each participant to maintain confidentiality during the research processes,

and secured them in a locked place.

Data Analysis

Yin (2017) noted that case study research constitutes an all-encompassing method

that covers the logic of design, data collection techniques, and specific approaches to data

analysis and interpretation. Yin further emphasized the power of high-quality case study

research that focuses on rigor, validity, and reliability. According to Bernard and Ryan

(2016) and Patton (2015), the objective of data analysis in qualitative research is to

explore the meaning of data and ascertain various dispositions and implementation to

present the findings. Van Den Berg and Struwig (2017) argued that data analysis is a

paramount technique for searching data patterns and describing research data.

Researchers must have the responsibility to understand the context of data analysis to

present reliable findings and convince readers with the findings. As with all data, analysis

and interpretation are required to bring order and understanding; data analysis is an

interactive process, where data are systematically searched and analyzed to provide an

illuminating description of the phenomena under analysis. The process of data analysis is

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to assemble or reconstruct the data in a meaningful or comprehensible fashion, in a way

that is transparent, rigorous, and thorough, while remaining ‘true’ to participants’

accounts (Joslin & Müller, 2016). During data analysis, researchers use the data

triangulation method to provide additional sources for improving accuracy, credibility,

validity, and reliability (Okoe & Boateng, 2015). Data analysis is an iterative or recurring

process that leads to the creativity or development of new ideas to clarify the meaning of

data (Cope, 2014).

Through the processes of my research, I used methodological triangulation to

collect data from the interview, companies’ documents, and observations. Researchers

use methodological triangulation to improve research quality, accuracy, validity, and

reliability (Morse, 2015). I collected my information from interviews with participants,

governments’ official sources, and organizations’ reports to triangulate. From data

collected from interviews, I used NVivo software to develop codes and themes from

which I analyzed the strategies that the CAAs leaders used to mitigate fraud. As

suggested by Saldana (2016), researchers need to focus on data quality rather than

quantity because data quality in qualitative analysis leads to credible findings. For an

excellent accomplishment of my research, I referred to Yin’s (2017) five steps in data

analysis. Per Yin, to present a sound analysis, researchers need: (a) collect data, (b)

regroup data, (c) interpret data, (d) analyze data, and (e) present the findings. For my

research and data analysis processes, I listened to the tape recordings several times and

identified themes or patterns. Then, I organized the data into categories and by question

to see patterns and connections between the categories. After that, I interpreted where I

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should use the themes and connections to explain my findings. The analytic processes

were initial coding, adding comments and reflections, memos, looking for patterns,

themes, relationships, sequences, and differences. Finally, I explored patterns, elaborated

generalizations of themes to the fraud triangle theory, and presented my findings.

Reliability and Validity

Reliability and validity are crucial elements that researchers should focus on to

ensure the credibility of the study (Yin, 2017). Noble and Smith (2015) argued that

researchers could ensure validity by reflecting the view of the phenomenon studied and

reliability by presenting the consistency of the findings. The concepts of reliability and

validity may differ in a qualitative or quantitative method. Yin (2017) argued that

reliability and validity mitigate bias in research and promote transparency. For this

qualitative study, I used triangulation and member-checking to ensure reliability and

validity by collecting, organizing, and analyzing various sources of information. I also

assessed research quality by referring to the concepts of dependability, credibility,

confirmability, and transferability.

Reliability

Researchers refer to reliability to enhance the research’s dependability. Noble and

Smith (2015) revealed that the dependability of qualitative research studies includes the

use of rigor, reliability, and validity. In qualitative research, prolonged engagement,

persistent observation, and detailed description could lead to the rigor of a study (Lub,

2015). Bengtsson (2016) argued that researchers use reliability to select, justify, and

apply research strategies, procedures, and methods explained using the audit trail to

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evaluate the effectiveness of the study. I created an audit trail for any person who would

like to review my study process. For the dependability of my research, I used member-

checking. I sent a summary of the interview transcript for review to participants to ensure

the accuracy of their answers and to mitigate any possible bias.

Validity

According to Marshall and Rossman (2016), the concept of validity in the

qualitative study implies a comparison to the concepts of credibility, trustworthiness, and

authenticity. The study is valid if the findings are accurate or correct, not only for the

researcher, but also for the participants and the readers of the study. Fusch and Ness

(2015) stated that validity is crucial in qualitative research attesting to the credibility and

accuracy of the findings. Researchers should mitigate bias in enhancing the validity of the

research results. For the study to be valid and trustworthy, researchers must combine

credibility, transferability, confirmability, and data saturation (Yin, 2017).

Credibility. To enhance credibility, researchers can use triangulation and member

checking (Yin, 2017). Brooks and Normore (2015) revealed that researchers could use

triangulation and member-checking to mitigate bias by ensuring the proper identification

and description of the phenomenon analyzed. Credibility in qualitative research is critical

to prove trustworthiness (Hussein, 2015). For my research, I ensured credibility by

collecting and aligning data with the primary goal of the study. I also used triangulation

with interview summaries, organizations’ websites, and government official sources; and

member-checking to strengthen the credibility of my study.

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Transferability. Transferability is the ability to determine if different or similar

research findings exist in other studies (Hadi & Closs, 2016). Morse (2015) argued that

researchers must provide detailed descriptions to convince readers to make inferences

about the findings by providing readers with a rationale and rich details on the case

study. For my research’s transferability, I provided specific details about data collection

and analysis to enable readers to determine if similar findings or results exist in other

studies. I also used the principles of data saturation to enable readers to understand the

originality of the findings. Fusch and Ness (2015) noted that data saturation is the process

of conducting interviews until a researcher finds that there are no new data, themes, and

codes to add and use in the data collection processes.

Confirmability. Yazan (2015) argued that using NVivo software ensures a

research’s confirmability by providing the interpretation of data collection and analysis.

Confirmability is critical for readers to approve the findings of the research (Cope, 2014).

Marshal and Rossman (2016) suggested that researchers must convince readers to

confirm the conclusion of the study. For my research, I verified the confirmability of my

study by providing real evidence and cases of the impact of fraud on the CAAs. I also

used methodological triangulation by exploring data from semistructured interview

questions, organizations, and public information.

Data saturation. Researchers use data saturation to show the quality, credibility,

and transparency of the research (Senden et al., 2015). As suggested by Senden et al., my

goal was to avoid data redundancy and continuously analyze information from interviews

and organizations’ documentation until I reached data saturation. Fusch and Ness (2015)

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noted that data saturation is the process of conducting interviews until a researcher finds

that there are no new data, themes, and codes to add to the data collection processes.

Saunders et al. (2018) echoed that researchers should continue to collect information until

reaching data saturation. For my study, I ensured data saturation by continuing to collect

data with additional interviews until no new themes, codes, or concepts emerge during

data analysis processes.

Transition and Summary

In Section 1, I presented the background, problem statement, purpose statement,

nature of the study, research question, and interview questions related to my study. I also

introduced the conceptual framework, operational definitions, assumptions, limitations,

delimitations, and significance of my study. Further, I presented the review of the

professional and academic literature, which described the concepts of fraud triangle

theory and addressed causes, consequences, and impacts of fraud on nonprofit

organizations’ performance.

In Section 2, I presented a restatement of the purpose statement, the role of the

researcher, participants, and research method and design. I also described the population

and sampling, ethical research, data collection instruments and techniques, data

organization and analysis, and discuss data consistency and credibility in qualitative

analysis. In Section 3, I present the findings, the implications for social change, and the

recommendations for nonprofit leaders to mitigate fraud in their organizations. I also

formulate recommendations for further research and presented the conclusions of my

study.

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Section 3: Application to Professional Practice and Implications for Change

Introduction



Fraud negatively affects business performance and exploring the impacts of fraud in

nonprofit organizations could lead to improved relationships between nonprofit

managers, government agencies leaders, and private or official contributors (Deslatte,

Schatteman, & Stokan, 2019). The consequences of fraud in nonprofit organizations may

lead to decreased trust among stakeholders and individuals’ well-being in the local

communities (Hou, Zhang, & Guo 2020). Finding strategies to mitigate fraud in the

CAAs made this study significant and relevant for future businesses. For data collection, I

conducted semistructured interviews with four top executive leaders of the CAAs located

in Maryland and performed data triangulation for my data analysis.

Based on the conceptual framework of the fraud triangle theory, the emergent

themes came from participants’ transcribed interviews, notes, memos, internal company’s

documentation, government documents, and the literature reviews. After transferring data

into NVivo 12 and using thematic analysis, I found three primary coding themes and six

subthemes related to the strategies needed for mitigating fraudulent behaviors in the

CAAs. The primary themes were (a) ethics and regulatory compliance, (b)

transformational leadership style, and (c) managerial skills. The sub-themes were (a)

honesty and loyalty, (b) stakeholders’ attitudes, (c) hiring and training, (d) adaptation to

change, (e) business skills and experience, and (f) understanding business practices. For

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validity and reliability, I used member checking by obtaining and analyzing participants’

summaries validation and applied methodological triangulation by collecting additional

information from organizations financial reports for review and verification, and public

information about nonprofit organization records. My findings may help leaders or

managers of the CAAs to mitigate and prevent fraud, improve business performance, and

sustain organization longevity. I also provide some critical thinking and insights for the

further analysis of fraudulent behaviors in organizations.

Presentation of the Findings

The overarching research question for this research study was “What strategies do

nonprofit CAA executive leaders use to reduce fraudulent financial activities?” I used a

qualitative multiple case study, which was useful to collect information from different

participants who experienced the phenomenon. A multiple case study design was crucial

to better understand the phenomenon and get answers to who, why, when, and how

questions about fraudulent behaviors. For data collection, I conducted semistructured

interviews, which included seven open-ended questions (see Appendix B). Participants

included four top executive leaders of CAAs located in Maryland. For confidentiality, I

coded my participants as P1, P2, P3, and P4 and their companies as C1, C2, C3, and C4.

To mitigate research biases, I used an interview protocol, member checking in the

data collection and analysis processes, and adhered to the Belmont Report Principles,

which recommend treating during the research processes participants with respect,

justice, and beneficence. Member checking helped me clarify the meaning of

communications by the participants and agree with the content of their summaries after

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receiving their feedback, which also helped with research validity and ensuring the

reliability of my research. Methodological triangulation was also helpful in the process of

data collection and analysis by providing more details about my research processes and

aligning my data with the primary research goal. For data triangulation, I used interview

summaries, the companies’ financial reports and documents, and nonprofit organization

public records from official sources.

For data analysis, I entered interview recordings, interview summaries, and notes

into NVivo 12 to identify nodes, themes, and subthemes. The results from NVivo 12 and

my analysis indicated three major emerging themes, which consisted of (a) ethics and

regulatory compliance, (b) transformational leadership, and (c) managerial skills. The

themes indicated the strategies needed for top managers or leaders of CAAs to mitigate

fraud in their organizations. Data saturation enhanced trustworthiness and validity by

ensuring that participants responded to all questions, and there was no new idea, code,

theme emerging during the research. After interviewing the fourth participant, I reached

my data saturation because there was no new information emerging to add to my

research.

The results of my data analysis sorted by NVivo 12 indicated that participants

supported that financial pressure, lack of ethics, and weakness of controls were among

the primary causes of fraud. I sorted through and analyzed the data results to reach the

conclusion that the fraud triangle theory was a crucial managerial tool to promote positive

behaviors and mitigate fraud in nonprofit organizations. All four participants concluded

that mitigating fraudulent behaviors are critical to ensure trust among stakeholders and

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organization success. All participants admitted that promoting business ethical norms and

complying with organization regulations and policies contributed to prevent the loss of

money or other assets.

Participants also indicated that the strategy to promote internal controls by using

internal auditors to check cash receipts, pay stubs, and inventories was crucial to detect

and prevent accounting errors or fraud. Moreover, participants added that hiring external

controllers or auditors to conduct an independent analysis of their accounting records or

financial statement helped to increase the accuracy of financial records, detect, and

prevent fraud. P1 and P2 stated that fraud affects the organization’s reputation and

presented their strategies to mitigate fraud in the workplace by using, for example, the

background check before hiring new employees to ensure that they hire honest and loyal

people. Managers should mitigate fraud in the workplace to increase a company’s

reputation and customer satisfaction (Lokanan, 2015).

All participants also argued that increasing transparency and promoting full

disclosure of financial statements contributed to mitigate fraud and increased

stakeholders’ satisfaction. For example, P2 indicated that promoting employees to have

access to the content of financial reports and encouragement them to share their feedback

for any eventual issues related to fraud was crucial to mitigate fraud and promote the

credibility of the organization. P1 and P4 added that presenting a detailed financial report

to stakeholders allowed them to understand how their donations influenced the

organization’s goals and increased transparency over fraud. Moreover, participants stated

that they shared the disclosure of financial reports, allowing employees to understand the

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impacts of fraud and be aware of fraudulent practices. The data analysis overall indicated

that combining the fraud triangle theory with ethics and regulatory compliance,

transformational leadership, and managerial skills were the primary strategies to prevent

and mitigate fraud in nonprofit organizations.

Theme 1: Ethics and Regulatory Compliance

The first emergent theme was ethics and regulatory compliance. Ethics and

policies are guidelines for employees to know and understand what is right to do

according to an organization’s core values and beliefs (Downe, Cowell, & Morgan,

2016). Increasing ethical and regulatory compliance leads to business effectiveness

(Cumming, Hou, & Lee, 2016). Based on the fraud triangle theory, the opportunity to

commit fraud may come from the lack of knowledge of ethical standards and business

regulations (Jarozlaw, 2016). I analyzed the data from transcribed interviews,

participants’ notes, organizations’ documentation, and government documents of P1, P2,

P3, and P4 and found that compliance with ethics and regulations were strategic to

mitigate fraud in nonprofit organizations (see Table 2).

From my literature review, I found that to prevent fraud and sustain activities over

time, nonprofit organization leaders should also implement ethical and regulatory

compliance to increase customers’ satisfaction. Stakeholders such as customers,

employees, and donors must be satisfied to sustain nonprofit organizations’ success

(Madura, 2015). Responses for ethics and regulatory compliance came from Interview

Questions 1 and 2, which focused on strategies to reduce fraudulent financial activities.

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The responses from all participants indicated that nonprofit leaders used the concept of

fraud and ethics to increase incomes and sustain their organizations for a long time.

Participants argued that ethics and regulatory compliance were essential to

mitigate fraud and attain employees’ satisfaction while they understand their roles and

obligations in reaching the organization’s mission. Previous research has also indicated

that business leaders need to comply with both institutional regulations and ethical

standards to remain competitive (Girgenti & Hadley, 2016). P1, P2, and P3 presented

their business strategies in which they described the positive impact of regulatory

compliance. For example, P1 stated that “There is a written policy in place for record

retention and destruction, and the organization has a written procurement and

whistleblower policies that have been approved by the governing board.” P2 echoed, “We

are constantly assessing the policies and procedures in terms of likelihood and magnitude

of impact, determining a response strategy, and magnitude process.” P4 added,

“Improving practices of ethical behaviors contribute to discouraging the conflict of

interest and fraud.” Further, P3 added, “Unethical actions or the appearance of unethical

actions are unacceptable under any conditions.” The findings also showed that ethical and

regulatory compliance is critical to avoid penalization, which can affect organizations’

success. Participants argued that regulatory compliance increases honesty and loyalty

among stakeholders. Participants also recommended that nonprofit leaders should use

fraud and ethical theories as managerial tools to improve transparency.

The emergent theme of ethics and regulatory compliance aligned with the fraud

triangle theory conceptual framework and the body of knowledge from the literature

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review in this study. Based on the fraud triangle theory, promoting ethics and regulatory

compliance allows employees to promote positive behaviors and practices, which is

crucial for mitigating fraud (Adelstein & Clegg, 2016). All participants agreed that

combining ethical value and regulatory compliance in their business practices with

honesty and loyalty and stakeholders’ satisfaction was critical to improve organizations’

success and mitigate fraud in nonprofit organizations.

Honesty and loyalty. Honesty and loyalty are critical attitudes that managers

must promote to increase stakeholders’ satisfaction (Ferrell, Harrison, Ferrell, & Hair,

2019). Honesty and loyalty are the primary factors that contribute to increasing trust and

satisfaction between organization leaders and employees (Parmar, Keevil, & Wicks,

2019). P1 and P3 stated that increasing honesty and loyalty led to transparency and fraud

prevention. P3 added that “We disclose in our monthly report all financial expenditures

and receipts to promote honesty and increase employees’ loyalty.” Moreover, P2 and P4

noted that building trust increased confidence, and employees feel free to ask questions or

suggest new ideas that could contribute to promoting ethical value and mitigate fraud. For

example, P2 stated that “We realize that a strong board of directors with transparency,

oversight, and accountability sets the tone and is the first defense against fraud.” P4 also

echoed that “We believe that being honest and loyal to the organization we work for is

crucial to build a strong relationship between employees and employers.” Based on the

fraud triangle theory, honesty and loyalty are critical factors for improving business

practices and preventing fraud (Hui, Chih-Wen, & Yi-Han, 2015).

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Stakeholders’ attitudes and behaviors. Nonprofit organization leaders should

promote good governance to increase trust among stakeholders and mitigate fraud

(Dzomira, 2014). Nonprofit leaders or managers have the mission to assess employees’,

donors’, and government officials’ attitudes and behaviors to their organizations to

ensure the credibility of the organization when collecting and managing funds or

providing services to customers (Dzomira, 2014), which the findings from the interviews

aligned with (see Table 2). P2 and P4 reported that analyzing behaviors enabled their

companies to understand the impact of fraud on the organization’s success. P2 added that

“We use a short monthly survey to encourage stakeholders’ feedbacks to better learn and

understand their needs and improve the quality of our services.” P2 and P4 argued that

listening with attention to stakeholders allowed their companies to increase financial

resources, promote customer service, improve service quality, and detect fraud. P1, P2,

and P4 suggested that increasing transparency among stakeholders when presenting

financial reports and other business activities is critical to increase trust and motivate

their feedbacks about fraudulent behaviors. Promoting, for example, transparency, can

mitigate fraud because fraudsters would not have the pressure, opportunity, or

rationalization to commit fraudulent behaviors once the organization leaders make

information public (Pollman, 2020). Based on the tenets of the fraud triangle theory,

promoting stakeholders’ positive attitudes, customer service, and service quality for

increasing the well-being of people in the local communities is crucial to gathering

information that could lead to mitigating fraud.

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Table 2

Ethics and Regulations Compliance

Nodes/Themes

Number of

participants Participant engagement (%)

Honesty and loyalty 4 100

Stakeholders’ attitude and

behavior 3 75

Theme 2: Transformational Leadership Style

The second emergent theme was a transformational leadership style.

Transformational leadership leads to integrate all followers as a part of the organization,

and its direct or indirect psychological impacts on employees are important to promote

job satisfaction (Peng, Liao, & Sun, 2020). Additionally, based on the fraud triangle

theory, promoting good communication and improving job satisfaction and

organizational justice is critical to mitigating and preventing fraudulent behaviors

(Greenwood, 2016). For example, P2 and P4 argued that the use of inspiration, empathy,

and confidence to align followers in the vision and mission of their organization

contributed to increase stakeholder’s confidence and prevent fraud. P1 echoed that, “My

role as a manager is to remind during daily meetings that we are all together for the

common goals which are success and longevity.” The findings from the participants’

interviews indicated that an appropriate transformational leadership style is essential for

hiring devoted and motivated employees to sustain the organization’s productivity and

longevity.

Further, managers who hire and train devoted employees have the chance to

promote productivity and accomplish the company’s vision and mission (Breevaart &

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Bakker, 2018; Frieder, Wand, & Oh, 2018; Nelissen, Forrier, & Verbruggen, 2017). P2

and P3 noted that their leadership styles enabled their employees to understand the

organization’s mission and goals. For example, P3 added, “New hire orientation and

human resources reviews of the organization helped employees to understand why

organization leaders must mitigate fraud to increase donors’ satisfaction.” P1 and P2 also

stated that using background checks in the hiring process enabled the company to recruit

good and devoted employees. P2 said, “The company uses the E-Verify system to verify

job seekers information from the government database to avoid hiring illegals or

criminals.” P3 added that hiring good employees is critical to mitigating fraudulent

behaviors. P1 and P4 also argued that promoting new employee training and employee

satisfaction surveys were strategic to circumvent the rationalization to commit fraud.

Transformational leadership is a supportive managerial tool that effective

managers should use for their organization's effectiveness (Amor, Vázquez, & Faíña,

2020). Based on the tenets of the fraud triangle theory, transformational leadership is

critical for mitigating fraud by hiring and training motivated, skilled, and devoted

employees (Peng & Sun, 2020). Promoting the adaptation of change to increase

satisfaction among stakeholders should be a crucial factor that effective managers need to

mitigate fraud by promoting the denunciation of fraudulent behaviors.

Hiring and training. Employees are among the primary sources of production

and valuable assets that promote productivity. In nonprofit organizations, executive

leaders or managers need to ensure the hiring process and job training are effective to

recruit employees who will not be involved in fraudulent practices (Madura, 2015). Some

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researchers argued that promoting employee training is strategic to increase knowledge,

skills, and adaptation to change in an organization (Nellissen, Forrier, & Verbruggen

(2017). Moreover, nonprofit CAA leaders need to be transformational leaders to increase

hiring and training practices, monitor and assess employees’ skills, identify the causes of

fraud and plan the best measures to mitigate fraud in their organizations (Madura, 2015).

The results of data analysis indicated that participants used a transformational leadership

strategy to hire and train employees to better understand business practices and the

implications of fraud in the organization.

All four participants agreed that hiring and training employees lead to promoting

business practices and fraud prevention. Three out of four participants indicated that their

strategies to work as a team to guide the change through their inspiration contributed to

use for instance managerial software and the Internet to hire the best employees, planned

organizational planning, and monitor organization activities in real-time. P1, P3, and P4

presented their training plan and budget to ensure their commitment to training activities.

P2 and P4 also presented their strategy to use background and drug tests to ensure the

quality and morality of new hires. Moreover, P3 added that “We prefer and encourage

hiring employees locally because it is easier for the company to verify the credentials of a

local employee.” Based on the tenets of the fraud triangle theory, it becomes clear that

bad employees may commit fraud (Greenwood, 2016). As nonprofit organizations are

like volunteer services, managers should use transformational leadership to mitigate the

opportunity, rationalization, and incentive to commit fraud by hiring credible and vetted

people to prevent fraud.

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Adaptation to change. In the current nonprofit organization’s workplace,

managers need to understand and adopt change. The rapid evolution of technology and

business regulations, make change irreversible to compete, increase customer service, or

act efficiently in real-time (Garba, 2017). Isal, Pikarti, Hidayanto, and Putra (2016)

argued that using for instance technology innovation allows managers to assess controls,

inventories, any other business activities at a low cost, and prevent fraud. The findings

from interviews aligned with Isal et al.’s statement and indicated that participants used

adaptation to change strategy to reduce fraudulent behaviors (see Table 3). P1, P3, and

P4 noted that adopting changes in dealing with fraudulent practices had a positive impact

on mitigating fraud. P1 stated that “The organization used an automated control

electronic system to monitor all agency materials and increase fraud prevention and

detection at any time.” P3 added, “Using new technology enabled to monitor actual

budget vs financial performance and oversee the reserve of funds in real-time.” Based on

the tenets of the fraud triangle theory, adaptation to change in nonprofit organizations is

crucial to detect and prevent fraudulent behaviors.

Table 3

Transformational Leadership Style

Nodes/Themes

Number of


Hiring and training 4 100

Adaptation to change 3 75

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Theme 3: Managerial Skills

The third emergent theme was managerial skills. Managerial skills sub-themes

were business skills, experiences, and understanding of business practices. According to

the fraud triangle theory, managers and organization leaders should have the capability

and ability to efficiently lead an organization (Suryandari, Yuesti, & Suryawan, 2019).

Gordian and Evers (2017) echoed that the role of effective leaders or managers is to

prevent fraud and promote success. A successful leader or manager should have

managerial skills to learn from failure, experience, and to make flexible changes that fit

the organization’s goals. Corruption and fraud have negative impacts on organization

success, and managers should have efficient managerial tools such as technology

innovation, internal and external controls, and periodic business evaluation to improve

transparency and prevent fraud (Gordian & Evers, 2017).

The results of data analysis indicated that participants used their knowledge,

experience, and skills to monitor business activities, analyze customers’ behaviors, and

mitigate fraud. The theme management skills emerged from interview questions 4, 5, and

6, in which participants explained strategies they used to circumvent pressure,

opportunity, and rationalization for employees to commit fraud. The theme management

skills aligned with the fraud triangle theory because managers must understand business

practices before planning strategies to improve management weaknesses or detect fraud.

All four participants affirmed that the fraud triangle theory included critical elements

related to management skills. For example, P1 stated, “Using audit and organizational

skills contributed to complete the IRS Form on time and correctly, and also conduct the

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performance appraisal of the CEO/Executive director within each calendar year.” P2 and

P3 used their managerial skills to improve employees’ payroll and track employees’

attendance every day by using for instance Raiser’s Edge software. P1 and P4 added that

using internal and external audits regularly allowed the organization to identify financial

data misalignment. P1 added, “The organization conducts an annual audit, which is

completed by a certified public accountant on time in accordance with Title 2 of the Code

of Federal Regulations, …and the organization’s auditor presents the audit findings to the

governing board.” Previous authors argued that managers or leaders should have a basic

understanding of business operations and regulations to reach success (Lynch, 2016). All

participants suggested increasing internal and external audit practices is paramount to

increase transparency and detect fraud. The findings were substantial with the

requirement to use management skills as a strategic tool to mitigate fraud in nonprofit

organizations.

Business skills and experience. Participants agreed that business knowledge,

experience, and skills were among the factors that contributed to identify, prevent, and

mitigate fraud (see Table 4). Mlambo, Mubecua, Mpanza, and Mlambo (2019) argued

that a successful leader or manager must have business skills such as competency,

problem-solving capability, adaptability, self-direction, initiative spirit, critical thinking,

innovative skills, and communication skills. P1 and P2 noted that their business skills

and experience were critical to promote financial activities and prevent fraud. P2 added

that “My personal experience of working for many years as a manager and business skills

acquired from my education helped me to implement an effective internal control form

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any input to output activities.” P1 and P4’s statements aligned with the findings of

Bennett and Hatfield (2018). Bennett and Hatfield noted that nonprofit leaders, including

pastors and religious leaders, should have audits skills and experience to ensure that

financial controls and fraud prevention are adequate. P1 added that “My experience of

dealing with auditors contributed to understanding the implications of audit findings on

organizational success.” Moreover, P2 and P4 echoed that their business skills and

experience of working for many years in a nonprofit organization enabled them to be

aware of fraudulent practices and use his knowledge and skills to prevent fraud at all

business levels of activities. As stated by Ho and Mallick (2017) having and using

business skills and experiences is paramount to mitigate fraud in nonprofit organizations

and meet organizational goals. Based on the fraud triangle theory, having managerial and

business skills will be crucial for managers to prevent and mitigate fraud in nonprofit

organizations.

Understanding business practices. Business operations or practices are

operational activities that contribute to promoting organization success (Gottschalk,

2016). Per Gottschalk, controlling donor funds, grants, and fundraising in receipts and

expenses is an important business practice that should always be maintained in nonprofit

organizations to assess risk management and prevent accounting irregularities. P1 and P4

stated that understanding business practices is critical to detect fraudulent behaviors and

prevent financial losses. P4 added that “My business background and profile allowed me

to plan in advance employee meetings, materials acquisitions, funds collections, seminars

with donors, and government grants collection.” Moreover, because of financial

85

constraints, P2 and P3 used business practices to regularly permutate employees at some

positions to allow them to learn and understand each position and be aware of the impact

of fraud. This strategy aligned with the fraud triangle theory and the analysis of

McDonnell and Rutherford (2018), who argued that understanding business practices is

crucial to promote positive organizational behaviors and contribute to increasing

stakeholders’ satisfaction.

Table 4

Managerial Skills

Nodes/Themes

Number of


Business skills and experience 3 75

Understanding business practices 4 100

The overall findings of this qualitative multiple case study aligned with the

literature review and the conceptual framework of the fraud triangle theory. The results

revealed that using honesty and loyalty, transformational leadership style, and managerial

skills strategies was crucial and strategic for top nonprofit leaders to mitigate fraudulent

behaviors in their organizations. Nonprofit managers or leaders may have different views

and strategies about mitigating fraudulent behaviors; however, finding appropriate

strategies is crucial to prevent fraud and ensure organization longevity. Nonprofit leaders

or managers who are struggling to improve transparency, increase productivity, and

mitigate fraud should explore the advantages of using the fraud triangle theory and the

results of this study to understand the impacts of fraudulent behaviors, detect and prevent

fraud, and promote their organizations’ success.

86

Applications to Professional Practice

The purpose of this research study was to explore strategies nonprofit CAA

executive leaders use to reduce fraudulent financial activities. The findings of this

research were appropriate for understanding the causes and impacts of fraud in nonprofit

organizations located in Maryland. According to Nanduri, Jia, Oka, Beaver, and Liu

(2020), business leaders or managers need effective strategies to mitigate fraud and

ensure long-term success. Using a qualitative multiple case study with semistructured

interviews and document analysis; I conducted interviews with four top executive leaders

of nonprofit CAAs located in Maryland. I found three primary themes and six sub-themes

using NVivo 12 coding and data analysis. The primary themes consisted of (a) ethics and

regulatory compliance, (b) transformational leadership style, and (c) managerial skills.

The sub-themes consisted of (a) honesty and loyalty, (b) stakeholders’ satisfaction, (c)

hiring and training, (d) adaptation to change, (e) business skills and experience, and (f)

understanding business practices. Managers or leaders of nonprofit organizations should

build their strategies based on the findings of this study to prevent and mitigate fraudulent

behaviors. As stated by Omair and Alturki (2020), fraud affects an organization in

different aspects, and it should be understood in its context of time, location, resources,

and function to better mitigate it. Based on the fraud triangle theory, the attitudes and

characteristics of nonprofit leaders are crucial to effectively prevent and mitigate fraud

within an organization (Cressey, 1953).

Data collected from interviews indicated that fraud in nonprofit organizations is

becoming a critical business concern for managers to promote business credibility and

87

sustainability. Moreover, combining ethics and regulatory compliance with honesty and

loyalty and stakeholders’ attitudes is strategic to motivate managers to build trust and

increase confidence among partners. Saha, Cerchione, Singh, and Dahiya (2020) echoed

that to promote business performance, organizational managers should promote ethical

leadership and corporate social responsibility. Using a transformational leadership style

with effective hiring and training and adaptation to change is crucial for managers to

involve all partners or stakeholders to adhere to the organization’s mission and vision.

Further, using managerial skills with strategic business experience and the ability to

understand business practices is also critical and constructive for organization

development. Nonprofit managers or leaders can use the findings of this study to prevent

fraud and predict a better future of their organization. The findings are also practical

solutions for nonprofit leaders or managers who are struggling to mitigate fraud and

improve management leadership. Top managers or executive leaders might also identify

effective business strategies to improve internal controls, organizational changes, and

monitoring business operations that provide oversight and enhancement of service

deliverables while avoiding the loss from fraudulent activities (Sibanda, Zindi, &

Maramura, 2020).

Implications for Social Change

The implications for positive social change include the potential for nonprofit

executive leaders or managers to develop processes and procedures that advocate for

better policies, strategies to reduce fraudulent financial activities, promote corporate

responsibility, and influence the performance and positive outcomes of business

88

activities. Fraud affects organization success, and failure to mitigate or ban fraud could

affect organization viability. The viability of a nonprofit organization may also have

many impacts on other stakeholders such as donors, employees, and government officials

to promote other social activities in the local communities (Lueg & Radlach, 2016). Per

Lueg and Radlach (2016), leaders who catalyze the development and sustainability of

social programs such as education could promote employees, families, and all the

community members’ satisfaction. To promote social change, Lee (2018) encouraged

organization leaders to promote social activities that may generate positive economic

value and contribute to improving the well-being of the local community members. The

findings of this study could also help nonprofits leaders of the community action agencies

to improve the success of programs such as Head Start, tax returns preparation, adults and

children literacy in local communities, and other social services.

Recommendations for Action

Nonprofit business scandals and other fraudulent acts negatively affect

organizational functioning, service delivery, and board governance (Zona, Minoja, &

Coda, 2013). Kummer et al. reported that nonprofit organization fraud cases increased by

20% in the United States between 2010 to 2015, which amounted to about $40 billion of

lost revenue each year. Per Kummer et al., the high rate of fraudulent acts or behaviors

affect organization reputation, productivity, and survivability. Ge et al. echoed that

understanding the impacts of fraud on nonprofit organizations helps to increase

organization long-term financial value and reduces the negative image of the organization

by donors, government officials, and community members. Mitigating fraud makes

89

organizations resilient, so organization leaders will be able to plan and sustain

organization longevity and increase social program activities (Gordian & Evers, 2017).

The findings from this study indicated that for nonprofit leaders to promote their

social programs, they need to comply with ethical values and business regulations, use a

transformational leadership style to unify employees for the same vision, and have

management skills to promote and control effectively their business activities. These

three recommendations should be beneficial for nonprofit leaders or managers who are

struggling to mitigate fraud and potential small business entrepreneurs who are planning

to launch new nonprofit businesses. All participants agreed that ethical values and

regulatory compliance have a positive impact on detecting and mitigating fraud. I

recommend compliance with ethics and regulations to increase trust and transparency

between leaders and employees. Second, to motivate employees, nonprofit organization

leaders must use a transformational leadership style and have managerial skills to lead

efficiently. As described by Cressey (1953), mitigating fraud is critical for improving

organizational performance and sustainability. The results of this study indicated that

nonprofit organization leaders who used their managerial skills have the chance to

prevent and reduce fraudulent behaviors in their organizations.

The findings of this study are crucial to nonprofit managers or leaders to sustain

productivity and longevity by mitigating fraudulent behaviors. I recommend scholars,

business analysts, researchers, small nonprofit organizations owners, small business

leaders, managers, entrepreneurs, and government agencies leaders to promote the

findings of this study by organizing academic and business conferences and business

90

forums to promote the perception and impacts of fraud in organizations. As my research

will be available in the ProQuest database for scholar researchers and students to review,

I will disseminate my study by preparing and providing a one- or two-page summary of

my research findings and recommendations to all participants. I will contact local

schools, churches, Small Business Administration, and the Nonprofit Organization

Association to organize conferences and present my findings. I will also publish my

research in the local journal to reach other organizations or people who will be interested

in my study.

Recommendations for Further Research

The participants in this study included only nonprofit leaders located in Maryland,

and who have been in business for more than 5 years. The primary limitations of this

study resulted from the (a) limited number of interview participants that could provide a

lack of perspectives on the topic of fraudulent financial activities, (b) the design of the

case study selected to conduct the study, and (c) focus of conducting interviews with

participants with the responsibility of organizational administration and the

implementation of internal control measures to provide strategies to reduce fraudulent

financial activities in CAAs. For further research, I recommend expanding the sample

size and qualifications to explore strategies nonprofit organization leaders or managers

use to mitigate fraud, as well as in other small business industries. Secondly, I

recommend researchers use different research methodologies and designs to collect and

analyze the impact of fraud on nonprofit and profit organizations to increase business

policies and practices. Finally, future researchers should explore the impact of fraud on

91

organizations by collecting data from those who are not in the top managerial positions,

such as cashiers, accountants, controllers, and mid-managers to receive another

perceptive of their experience and phenomenon.

Reflections

The long DBA study process was a great learning experience. I gained knowledge

and research tools from writing literature reviews and performing data analysis,

especially about fraud in nonprofit organizations. The purpose of my doctoral journey at

Walden University was to become a real promotor of positive social change. The analysis

and impact of fraudulent behaviors in nonprofit organizations were crucial to learn and

understand effective business strategies that lead to fraud prevention and promotion of

organization productivity and longevity. Moreover, as a novice scholar-practitioner, it

was challenging to identify and mitigate research biases and deal with some participants

who were top organization leaders. Some participants were reserved about providing

some confidential documents because they thought I would exploit them for other

purposes.

Despite all these challenges, I complied with the IRB policies and was able to

conduct and collect the information needed for my study. The findings of this research

allowed me to understand nonprofit leaders’ strategies used to mitigate fraudulent

behaviors and that promoted organization sustainability. The findings could also be

beneficial for small nonprofit organization owners, entrepreneurs, current nonprofit

leaders or managers, government agency leaders, and academic researchers or scholars. I

certainly also believe that the results of this research study are crucial and useful for other

92

organizations such as church leaders to understand the motivation for an individual to

commit fraud. Furthermore, the findings of this study have increased my interest to

become a consultant for nonprofit organizations.

Conclusion

Nonprofit CAAs have a mission to promote social change and economic

development. The high rate of fraud in nonprofit organizations affects the viability of the

business. The pressure, rationalization, and opportunity of the individual to commit fraud

have increased in both profit and nonprofit organizations and affect organizational

productivity. Nonprofit organization leaders in the CAAs need strategies to reduce or

mitigate fraudulent practices to promote organizational success and sustainability. The

purpose of this research was to explore strategies nonprofit leaders use to mitigate

fraudulent behaviors in their organizations. Understanding the impact of the fraud

triangle theory promotes awareness about fraudulent practices in organizations, ensures

organization success, and increases confidence among donors, employees, and

government agency leaders. Preventing fraudulent behaviors contributes to ensure long-

term financial goals.

Fraudulent practices have become more visible in the current business context

because of the pressure, rationalization, and opportunity that individuals have.

Consequently, using Cressey’s fraud triangle theory, the findings of this study indicated

that managers or leaders of nonprofit organizations must implement their strategies to

mitigate fraud at all business levels and should involve all stakeholders in meeting

organization goals and accomplishing organization mission. Cressey’s fraud triangle

93

theory does not only provide strategies to detect and analyze fraud, but also provide

crucial strategies to avoid, prevent, and eliminate fraud to increase business performance.

Nonprofit organization leaders should understand business practices and managerial tools

to develop effective strategies to sustain their organization for the long-term.

The findings of this study revealed three major effective strategies nonprofit

organization leaders use for mitigating fraudulent behaviors in their organizations. The

effective three strategies focused on: (a) complying with ethics and regulations to

promote transparency in doing his job at any time at work, (b) using transformational

leadership to lead efficiently followers and motivate employees to meet organization

vision and mission, and (c) using managerial skills to preserve organization assets,

promote organization success, and increase the organization’s value and image. Current

nonprofit managers or leaders who are struggling to mitigate fraud, academic researchers,

and scholars, potential entrepreneurs, and government agency leaders can use the

findings of this study to learn and understand the impact of fraudulent practices on

organizations. The findings may also be constructive to implement business policies or

strategies to sustain organizational success and longevity. Further, the findings may

contribute to promote a positive social change by supporting the success of programs

such as Head Start, tax preparation, adults and children education, and enhancing the

economic development for the local communities.

94

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Appendix A: Interview Protocol

1. I will introduce myself to participants

2. I will recap the purpose of the study, answer any questions, and make sure that

each participant signed the consent form.

3. I will record the interview with an audio recorder.

4. I will transcribe the interview (Verbatim) as a second support.

5. I will create a summary of each interview.

6. I will discuss member-checking with participants to confirm the accuracy of the

interview.

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Appendix B: Interview Questions

1. What strategies have you used to reduce fraudulent financial activities in your

organization?

2. How do you determine if your strategies used to reduce fraudulent financial

activities are working?

3. What strategies were the least effective to reduce fraudulent financial activities?

4. What, if any, strategies do you use to circumvent the pressure to commit a crime in

your organization?

5. What, if any, strategies do you use to circumvent the opportunity to commit a


6. What, if any, strategies do you use to circumvent the rationalization to commit a


7. What other information can you add about your strategies to reduce fraudulent


Documents

Reducing the Frequency and Effects of Fraudulent